Incident: In the first half of 2024, the company achieved operating income of 3.376 billion yuan, a year-on-year increase of 75.73%; realized net profit to mother of 0.231 billion yuan, an increase of 135.86% over the previous year. In 2024Q2, we achieved operating income of 1.562 billion yuan, an increase of 41.26% year on year, and realized net profit to mother 0.077 billion yuan, an increase of 30.40% year on year.

Shipping factors affected the delivery progress of overseas orders, and tracking bracket shipments fell short of expectations. 2024H1 achieved revenue of 3.376 billion yuan, and the supporting business module achieved revenue of 3.268 billion yuan (of which 2.7 billion yuan for overseas projects and 0.551 billion yuan for domestic projects). According to the bracket product classification, the tracking stand was delivered about 5.89 GW, and the fixed bracket was delivered about 2.08 GW. 2024Q2, the Red Sea conflict has posed huge challenges to global shipping, and the delivery speed and transportation costs of some of the company's overseas orders have also been affected to a certain extent. 2024Q2 achieved revenue of 1.562 billion yuan in a single quarter, down 13.90% month-on-month.

Changes in the shipping structure and accrual of credit impairment losses affect profit release. 2024H1, the operating rate of photovoltaic power plants in overseas markets such as the Middle East and India increased year-on-year. As overseas deliveries mostly used tracking brackets to optimize the structure of the company's delivery products, the company gradually implemented strategic layouts such as cost reduction and market development, and the gross margin of the photovoltaic stent system increased steadily. The comprehensive gross profit margin of 2024H1's stent business was 19.75% (including 20.57% gross profit margin for tracking brackets and 14.15% for fixed brackets), an increase of 3.35 percentage points over the previous year. 2024Q2's comprehensive gross profit margin was 17.71%, down 3.08pp from the previous month, which is expected to be mainly affected by the increase in fixed bracket shipments. Additionally, 24Q2 accrued credit impairment losses of 0.056 billion yuan. If credit impairment is added back, the 24Q2 company's operating side performance is fair.

Orders on hand are sufficient, and inventory indicates high performance growth. By the end of 2024H1, the company had orders of about 6.669 billion yuan, of which the tracking stand was about 5.549 billion yuan, the fixed bracket was about 1.073 billion yuan, and the others were about 0.047 billion yuan.

The company's contract debt at the end of 2024H1 was 0.554 billion yuan, up 57.28% from the end of 2024Q1. By the end of the reporting period, the company's inventory was 2.612 billion yuan, up 64.81% from the end of 2024Q1. Of this, 1.474 billion yuan of goods were issued, an increase of 46.36% over the beginning of the year. The company's inventory has increased dramatically, mainly in preparation for the second half of the year. Affected by this, the company's net operating cash flow in the first half of the year was -1.224 billion yuan. The company stepped up its preparation efforts, and the certainty of performance growth in the second half of the year increased.

Overseas production capacity has been accelerated, and the global layout has been further improved. The company signed a land lease agreement with the Saudi Industrial Cities and Technological Zone Authority (MODON) to plan the construction of localized production capacity in Saudi Arabia. After completion, the Saudi factory will become the second overseas production base after the Indian factory, with a design capacity of 3 GW. The supporting company's global supply chain system can deliver about 10 GW locally to meet the project delivery needs of the local area and surrounding regions. The company plans to establish separate subsidiaries in emerging photovoltaic markets such as Spain and South Africa to continuously improve its global business layout.

Profit forecasting and investment advice. We estimate that the company's net profit for 24-26 will be 0.701, 0.884, and 1.08 billion yuan, respectively, and the corresponding PE will be 16, 13, and 10 times, respectively. As a leader in overseas tracking, the company has benefited from the explosion of demand in the Middle East, Latin America, India and other regions; the company's overseas supply chain advantage is obvious, and the overseas market share is expected to steadily increase following Chinese EPC's share and maintain a “buy” rating.

Risk warning: Overseas market expansion risk, price fluctuation risk of major raw materials such as steel, risk of exchange rate changes.