Description of the event
On August 23, Times Electric released its 2024 semi-annual report. The company 24H1 achieved operating income of 10.284 billion yuan, +19.99%; net profit of 1.507 billion yuan, +30.56% year over year; net profit after deducting non-return to mother of 1.159 billion yuan, +24.77% year over year. Among them, Q2 revenue was 6.359 billion yuan, +15.94% year over month, +62.03% month on month; net profit 0.939 billion yuan, +30.63% year on year, +65.50% month on month; net profit without return to mother was 0.698 billion yuan, +14.29% year on year, +51.34% month on month.
Incident reviews
Profitability increased steadily, with 24H1 net profit margin of 15.57% (+1.7pct), weighted ROE of 3.93% (+0.65pct), gross profit margin of 27.84% (-3.24pct, affected by accounting caliber adjustments). The 24H1 company's expense ratio for the period was 14.62% (-3.94pct), of which the sales expense ratio, management expense ratio, financial expense ratio, and R&D expense ratio were 1.98% (-4.11pct, affected by accounting caliber adjustments), 4.21% (-0.29pct), -0.76% (+0.72pct), and 9.19% (-0.26pct), respectively.
24H1 rail transit business revenue was 6.139 billion yuan, +30.87% year-on-year, a significant increase. The revenue of rail transit electrical equipment/ rail construction machinery/ communication signal system/ other rail transit equipment was 49.47/0.557/0.416/0.219 billion yuan respectively, +27.33%/+15.57%/+131.47%/+52.23% compared with the same period last year. As railway passenger traffic has repeatedly reached record highs, China Railway Group's EMU tenders have already exceeded the level of last year, and the number of EMU advanced repair tenders has increased significantly, driving the rail transit electrical equipment business growth. The company actively lays out rail traffic signal business, maintains a stable market share for main line railway signal products, and obtains new orders for urban rail signal systems.
The 24H1 power semiconductor segment had revenue of 1.747 billion yuan, +26.63%; among them, the holding subsidiary CRRC Times Semiconductor's revenue was 2.047 billion yuan, +23.23% year over year; net profit was 0.707 billion yuan, +55.19% year over year, with outstanding profitability. The company's semiconductor production line is operating at full capacity, and the Yixing Phase 3 project is progressing steadily. It is expected to be put into operation in the second half of '24, and production capacity for medium- and low-voltage devices will continue to increase; IGBT7.5 generation chip technology products will be delivered in batches; SiC products have completed 4th generation groove gate chip development and production line transformation, and automotive SiC products are already in the continuous verification stage.
The 24H1 offshore equipment segment generated revenue of 0.405 billion yuan, +18.61% year-on-year, with steady growth. Offshore equipment has received many new orders at home and abroad. The global market share of underwater trenching and cable laying products continues to lead, and EROV (electric underwater robot) verification and testing are progressing smoothly.
The revenue of 24H1's new energy passenger vehicle electric drive segment and industrial conversion segment was 0.903 billion yuan and 0.903 billion yuan respectively, +8.23% and -3.58%, respectively, which was basically the same. The passenger car electric drive business has basically completed the layout of the four “1+N” production bases in the country, and production capacity has been steadily increased, supporting Hezhong and SAIC-GM-Wuling to achieve overseas exports of about 0.04 million units. Industrial conversion products have received new orders in the fields of new energy power generation, metallurgy, mining, ships, air conditioning, etc., and existing products continue to be delivered in batches. In the field of new energy generation, the delivery schedule of photovoltaic inverters and wind power converter products is accelerating.
24H1's sensor segment revenue was 0.136 billion yuan, or -47.01% year-on-year, falling short of expectations, but the overall impact was small. Affected by the decline in demand growth in the photovoltaic industry and the decline in the unit price of automotive sensor products, the company's sensor revenue declined. The company will further increase investment in R&D, promote the speed of iteration, diversify product types, strengthen domestic and foreign energy market development efforts, and achieve steady development of the sensor business.
Investment advice
The company is a benchmark state-owned enterprise for science and innovation with goals, strategy, strength and execution. It has completed a cross-industry and cross-sector layout from rail transit to “big transportation” and “new energy”.
In the short to medium term, the recovery in demand for rail transit equipment, increased maintenance, and the urban rail signal system business are expected to jointly drive the company's business into a new stage; the commissioning of power semiconductor production capacity is expected to further help the company expand its market share, optimize product structure, and support system business development.
In the medium to long term, the company uses “device-component-system” to build a product matrix. Platform-based electrical solution provider Hongtu has shown that the market share of the system business continues to increase, which is expected to form a situation where transportation and new energy are flying side by side to achieve leapfrog development.
We maintain our performance forecast for the company. We expect the company's net profit of 3.831/4.684/5.702 billion yuan to the parent company for 24-26, corresponding EPS of 2.71/3.32/4.04 yuan, maintaining a “buy-A” rating.
Risk warning
Demand for rail transit vehicles such as trains, locomotives, and urban railways fell short of expectations;
The growth of the EMU and urban rail maintenance business fell short of expectations;
The development of the urban rail communication signal system market falls short of expectations;
Power semiconductor business demand falls short of expectations;
Industrial conversion new energy power generation business market expansion falls short of expectations;
The market expansion of the new energy electric drive business fell short of expectations.