Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 1.268 billion yuan, a year-on-year increase of 7.12%; achieved net profit of 0.152 billion yuan, a year-on-year decrease of 5.95%; and realized net profit deducted from non-mother of 0.149 billion yuan, an increase of 13.61% year-on-year. Among them, Q2 achieved revenue of 0.606 billion yuan, a year-on-year increase of 5.08%; realized net profit of 0.061 billion yuan, a year-on-year decrease of 23.33%; and realized net profit without deduction of 0.059 billion yuan, a year-on-year decrease of 3.81%.

Ongoing orders are sufficient, and the “two-plane” business has reached a new level: the company has developed 555 varieties and is currently developing 145 varieties. In the field of gas turbines, we have developed hot end products for various types of gas turbines and achieved breakthroughs in G/H grade turbine blade technology. In the aero engine sector, the company continues to steadily supply core components such as high temperature alloy blades, chassis, and bearing seats for the C919 and C929, and is expanding relationships and orders with international partners.

Accelerate delivery of nuclear power business orders and expand the entire industry chain: In August 2024, the National Assembly approved 11 more nuclear power units. Demand for related nuclear power equipment and nuclear energy materials will be gradually released over several years, and the company's nuclear power business ushered in rapid development. The company actively expands the entire nuclear industry chain and continues to make steady progress in the fields of post-processing and nuclear technology applications in the nuclear industry. The company also actively participated in new fields such as advanced reactors and nuclear fusion, and established a joint venture in the first quarter of 2024 to conduct industrialization research.

Seizing new opportunities in the low-altitude economy, drones are progressing in an orderly manner: the entire engine has been optimized for the YLWZ-190 engine, and the assembly and testing of the YLWZ-300 engine has been completed. In terms of drones, a drone with a take-off weight of 600 kg has been successfully developed and is close to finalization; a drone with a take-off weight of 1,100 kg is also undergoing test flights.

Investment advice: The company has broad prospects in many aspects and is moving towards the high-end of the industrial chain. We expect the company to achieve operating income of 2.735/2.994/3.415 billion yuan and net profit of 0.395/0.488/0.61 billion yuan in 2024-2026. The corresponding PE was 17.75/14.35/11.48 times, respectively, maintaining the “gain” rating.

Risk warning: risk of falling demand; risk of export trade; risk of exchange rate fluctuations; risk of new business falling short of expectations