Incident: On August 27, 2024, the company released its 2024 semi-annual report. 24H1 achieved operating income of 2.473 billion yuan, an increase of 29.94% year on year; net profit due to mother 0.246 billion yuan, up 52.36% year on year; net profit after deducting non-return to mother 0.244 billion yuan, an increase of 55.44% year on year.

Looking at the single quarter, 24Q2 achieved operating income of 1.438 billion yuan, up 20.25% year on year and 39.07% month on month; net profit all exceeded the median forecast, with net profit attributable to mother of 0.157 billion yuan, up 32.96% year on year and 74.44% month on month; net profit after deducting non-return to mother of 0.155 billion yuan, up 36.87% year on year and 74.16% month on month.

In terms of profit level, 24H1's gross sales margin and net sales margin were 23.26%/9.96%, respectively, up 1.54pct/1.39pct year-on-year. 24Q2's gross sales margin and net sales margin were 23.40%/10.88% respectively, up 1.26pct/0pct year-on-year. The increase in profit levels mainly benefits from the company's strengthened control over the supply chain and the cost advantages brought about by its own technological progress.

In terms of cash flow, the net cash flow from 24H1's operating activities was about -0.45 billion yuan, down from the same period last year. The main reasons were an increase in payment of maturing notes and increased efforts to prepare raw materials.

Looking at the revenue structure: by product, 24H1's box-type substation revenue was 1.607 billion yuan, up 23.45% year on year, accounting for 65% of revenue; complete switch cabinet products were 0.269 billion yuan, down 6.89% year on year, accounting for 11% of revenue; transformer products were 0.474 billion yuan, up 110.21% year on year, accounting for 19% of revenue. By industry, PV was 1.097 billion yuan, up 32% year on year; wind power was 0.588 billion yuan, up 25% year on year; energy storage was 0.332 billion yuan, up 62% year on year; data center 0.118 billion yuan, up 4% year on year; compared with the same period last year, the PV industry line sales revenue share increased from 35% to 42%, and the energy storage industry line's share of sales revenue increased from 6% to 13%.

Investment advice: The “trilogy” of the company's business development is steady and steady. Along with the release of new high-quality production capacity, growth is outstanding. We expect the company's 2024-2026 revenue to be 6.55/8.3/9.85 billion yuan, with corresponding growth rates of 32%/27%/19%, respectively; net profit to mother is 0.63/0.84/1.05 billion yuan, corresponding growth rates are 27%/34%/24%, respectively, based on the closing price on August 27, 2024, and 13X, 10X, and 8X for 2024-2026. Maintain a “Recommended” rating.

Risk warning: the risk of rising raw material prices, increased risk of market competition, etc.