Brief performance review

On August 27, 2024, the company disclosed its semi-annual report. In the first half of the year, it achieved revenue of 2.47 billion yuan, a year-on-year increase of 30.2%; of these, Q2 achieved revenue of 1.44 billion yuan, a year-on-year increase of 20.6%; and realized net profit to mother of 0.16 billion yuan, an increase of 32.3% year on year, close to the previous performance forecast limit and in line with market expectations.

Management analysis

Domestic and overseas two-wheel drive, profitability continued to increase month-on-month.

In the domestic new energy market, the company leads the market share of box-type substation products; in overseas markets, the company's products are used in more than 40 countries, all over Southeast Asia, Europe, the Middle East and North America.

By product, 1H24's box-type substation achieved revenue of 1.607 billion yuan, a gross profit margin of 22.11%, and a year-on-year +1.63pct; the complete switch cabinet achieved revenue of 0.269 billion yuan, -6.89%, gross profit margin 20.13%, +1.13pct year on year; transformer products were 0.474 billion yuan, +110.21% year on year, gross profit margin of 25.79%, year-on-year -0.99pct.

1H24 achieved a comprehensive gross profit margin of 23.3%, +1.54pct year over year and +0.33pct month-on-month, mainly due to the cost advantages brought by the company's strengthened control of the supply chain and its own technological progress.

Revenue in the new energy sector is growing rapidly, and the data center sector is progressing steadily.

Scenery storage continued to expand in the first half of 2024, with the addition of 102.48 GW of PV installations in China, +31%; 25.84 GW of new wind power installations, +12% compared to the same period; the cumulative installed capacity of new energy storage projects already completed and put into operation reached 44.44 GW/99.06 GWh, an increase of more than 40% over the end of 2023.

By industry, the company's 1H24 PV industry line achieved revenue of 1.097 billion yuan, +32%; the wind power industry line achieved revenue of 0.588 billion yuan, +25% year over year; and the energy storage industry line achieved revenue of 0.332 billion yuan, +62% year over year. At the same time, the company continued to develop in the data center industry, and 1H24 achieved revenue of 0.118 billion yuan, +4% over the same period last year.

Investment in R&D continued to grow, and cash flow from operating activities declined year over year.

1H24 continues to increase investment in R&D, accelerate product upgrades and iterations, and enrich and improve the product line. R&D expenses were 0.089 billion yuan, +47% year over year; net cash flow from operating activities was -0.45 billion yuan. The year-on-year decline was mainly due to increased payment of maturing notes and increased company preparation efforts. The company continues to strengthen sales repayment management and supply chain fund management, and cash flow from operating activities is expected to improve in the future.

Profit Forecasts, Valuations, and Ratings

Considering the further improvement of the company's product matrix and the continuous expansion of multiple downstream scenarios, the company is expected to achieve operating income of 6.42/8.27/1.08 billion yuan in 24-26, an increase of 30/29/ 30%; achieve net profit to mother of 0.66/0.87/1.13 billion yuan, an increase of 33/31%. The current price of the company's stock is 13/10/7 times the PE valuation, maintaining a “buy” rating.

Risk warning

New energy installations fell short of expectations, raw material prices rose, power grid investment declined, and overseas expansion fell short of expectations