Incidents:

The company released its 2024 semi-annual report: in the first half year of 2024, the company achieved revenue of 1.052 billion yuan, an increase of 5.28% over the previous year; net profit attributable to mother/withheld from mother was 0.144/0.127 billion yuan, respectively, up 14.53%/9.07% year on year. Among them, in the second quarter, the company achieved revenue of 0.482 billion yuan, a year-on-year decrease of 4.11%, and realized net profit attributable to mother/deducted from mother was 0.06/0.046 billion yuan, respectively, up 21.23%/3.39% year-on-year.

The 2024Q1 growth rate was higher than Q2, and the energy saving service industry contributed mainly to revenue growth of 0.571/0.482 billion yuan in 2024, respectively, with year-on-year changes of 14.78%/-4.11%. By industry, the company's 2024H1 nuclear power/energy/metallurgy/energy saving service industry achieved revenue of 3.54/0.225/0.221/0.188 billion yuan respectively, with year-on-year increases and decreases of 1.08%/-34.14%/31.91%/117.53%, respectively. Among them, the energy saving service industry contributed the largest revenue increase.

Profitability continues to improve. In terms of high investment in R&D to guarantee core competitiveness and profitability, 2024H1's gross margin/net profit margin was 31.58%/13.65%, respectively, up 1.10/1.10pcts year on year; of these, the energy industry's gross profit margin was 13.93%, up 2.06 pcts year on year. In terms of period expenses, the 2024Q2 company's sales/management/ finance rate was 7.40%/6.33%/1.02%, up and down +0.26/+0.06/-0.71 pcts, respectively. The company's R&D rate during the same period was 6.06%, an increase of 2.09pct over the same period, providing a guarantee for the company's core competitiveness.

The nuclear power business is booming, and new businesses are developing steadily

In terms of nuclear power and military business, approval and construction of new nuclear power units has gradually become normalized. On August 19, the executive meeting of the State Council reviewed and decided to approve a total of 11 units for 5 nuclear power projects, and the nuclear power boom continues to rise. In addition, the company and the proposed intelligent manufacturing project for high-end valves disclosed in March 2024 are expected to add no less than 4 valves required for the company to build new nuclear power units. At present, key preliminary work such as land expropriation and environmental assessment has been successfully completed. The civil engineering of the project is under construction, which is expected to increase the company's performance along with the construction of the nuclear power unit. In terms of emerging business, in the field of hydrogen energy, the company's related products are mainly aimed at 35-105 MPa high-pressure hydrogen valves, which have the ability to be supplied in batches. Application scenarios include hydrogen refueling stations, logistics vehicles, forklifts, drones, hydrogen electric bicycles, etc., which already have batch supply capabilities, and have been widely used in most leading domestic hydrogen energy applications. In the semiconductor field, vacuum valves, ultra-clean valves, etc. have entered the user-side prototype verification stage, and the corresponding business is expected to maintain steady growth.

Investment advice and profit forecasting

The company is a domestic special valve provider. With the support of steady growth in traditional business and opening up room for growth in emerging businesses, the company's performance is expected to continue to grow. The company is expected to achieve revenue of 2.397/2.766/3.167 billion yuan in 2024-2026, net profit to mother of 0.321/0.407/0.484 billion yuan, EPS of 0.63/0.80/0.95 yuan/share, corresponding PE of 16.63/13.12/11.03 times, maintaining a “buy” rating.

Risk warning

Industry policy risk, risk of increased industry competition, risk of profits falling short of expectations, risk of raw material price fluctuations