The company disclosed its 2024 semi-annual report. During the reporting period, the company achieved revenue of 0.482 billion yuan, a year-on-year increase of 20.57%; net profit to mother of 79.64 million yuan, an increase of 84.09%; after deducting non-net profit of 75.9973 million yuan, a year-on-year increase of 79.08%; and basic earnings per share of 0.46 yuan.

Guoke Military's performance grew steadily in the first half of the year, and the growth momentum was strong. Guoke Military's financial report for the first half of 2024 shows that it achieved revenue of 0.482 billion yuan, a year-on-year increase of 20.57%, net profit of 79.6446 million yuan, a year-on-year increase of 84.09%, after deducting non-return net profit of 75.9973 million yuan, an increase of 79.08%; in the second quarter, the company's revenue was 0.298 billion yuan, up 17.47% year on year, and net profit to mother was 46.6814 million yuan, up 38.04% year on year after net profit not attributable to mother 45.6436 million yuan, an increase of 36.73%. In the reporting period, according to holding subsidiaries, Pioneer's revenue was 0.119 billion yuan, profit was 18.61 million yuan; Jiujiang Guoke 45.88 million yuan, profit 6.8 million yuan; Spark Military was 28.34 million yuan, profit was 1.48 million yuan; Xinming Machinery was 0.122 billion yuan, 28.36 million yuan; Aerospace Jingwei was 0.187 billion yuan, profit was 44.18 million yuan .

Gross margin has been growing steadily, and investment in R&D has been increased. The company's gross sales margin during the period was 36.16%, an increase of 2.06 pct over last year. Sales expenses were 7.59 million yuan, an increase of 21.15% over the previous year, mainly due to the increase in sales staff remuneration during the reporting period. The management fee was 35.45 million yuan, which is basically the same as in the first half of the year. Financial expenses - $11.83 million, a significant year-on-year decrease, mainly due to increased revenue from cash management products and reduced interest on loans during the reporting period. R&D expenses were 42.61 million yuan, an increase of 65.98% over the previous year. This is mainly due to the company's continuous increase in R&D investment in core products, further increasing investment in research on missile (rocket) solid engine power modules, intelligent new ammunition equipment, and individual weapon systems, while strengthening the introduction of high-level R&D personnel, and the subsequent increase in R&D remuneration.

A large share incentive plan fully stimulates employees' work vitality. In order to further improve the company's long-term incentive mechanism and attract and retain outstanding talents, a new round of equity incentives was carried out after the company went public. The incentive plan involved a total of 200 incentive targets, accounting for 23.26% of the company's total number of employees at the end of 2023. The number of restricted shares to be awarded under this incentive plan is 3.6 million shares, accounting for 2.05% of the company's total share capital of 175.7016 million shares on the day the draft incentive plan was announced. The grant price for restricted shares granted under this incentive plan is 21.13 yuan/share.

Increase investment in power modules and aerospace power to enhance the competitiveness of the company's products. The company expects to invest 0.81 billion yuan in the “Power Module Capacity Building Project”. The implementation of this project will further improve R&D and production conditions and related equipment and facilities, and enhance the scientific research and production capacity of engine power modules. The company plans to invest 0.34 billion yuan to build capacity for aerospace power research and development centers and supporting shells to help the company transform into the field of aerospace engine assembly.

Profit forecast: The company's revenue for 2024/2025/2026 is expected to be 1.289, 1.621, 2.027 billion yuan, and corresponding net profit of 0.178, 0.235, and 0.286 billion yuan, corresponding valuation of 37/28/23 times, maintaining a “highly recommended” rating.

Risk warning: New product development risk, military product order decline risk, military pricing model risk, shareholder holdings reduction may affect stock prices.