Incidents:

On August 28, 2024, Mingyang Electric released its 2024 semi-annual report: 2024H1, the company achieved revenue of 2.5 billion yuan, +30%; net profit to mother 0.25 billion yuan, +52% year over year; net profit after deducting non-return to mother 0.24 billion yuan, +55% year over year; gross sales margin of 23.3%, +1.5pct year on year; net sales margin of 10.0%, +1.4pct year on year.

Among them, 2024Q2 had revenue of 1.4 billion yuan, +39% month-on-month, +20%; net profit to mother of 0.16 billion yuan, +74% month-on-month, +33%; net profit of 0.15 billion yuan without return to mother, +74% month-on-month, +37% year-on-year; gross sales margin of 23.4%, +0.3 pct month-on-month, +0.7 pct year-on-year; net sales margin 10.9%, +2.2pct month-on-month, +1.0pct year-on-year.

Investment highlights:

In the first half of 2024, the company's revenue in the optical storage industry maintained a relatively rapid year-on-year growth, and the revenue of transformer products increased year-on-year. 2024H1, according to industry classification, the PV industry's revenue was 1.1 billion yuan, +32%; the wind power industry's revenue was 0.59 billion yuan, +25%; the energy storage industry's revenue was 0.33 billion yuan, +62% year over year; and the data center industry was 0.12 billion yuan, +4% year over year. 2024H1, according to product classification, the company's box-type substation products achieved revenue of 1.61 billion yuan, +23% year on year, gross profit margin of 22.1% year on year, +1.6 pct year on year; transformer product revenue 0.47 billion yuan, +110% year on year, gross profit margin of 25.8% year on year, -1.0 pct year on year; complete switch cabinet product revenue of 0.27 billion yuan, -7% year on year, gross profit margin of 20.1%, year-on-year +1.1 pct. Among them, the increase in the company's overall gross margin mainly benefits from the company's strengthened control over the supply chain, compounding the cost advantages brought about by its own technological progress.

Global new energy continues to grow, and the company's exports are expected to continue to benefit. According to the “Global PV Market Outlook for the First Quarter of 2024” report published by Bloomberg New Energy Finance (BNEF), in a medium scenario forecast of global PV installed capacity, the new global PV installed capacity will increase from about 444 GW in 2023 to 574 GW this year. In recent years, the company has accelerated its overseas market layout, continuously obtained new orders and breakthroughs in the international market in the fields of switchgear, transformers, photovoltaics, energy storage, etc., and rapidly expanded the company's popularity in the international market through cooperation with well-known domestic leading new energy companies. As of July 2024, the company's products have complied with international standards such as IEEE and IEC, and have been certified by a series of domestic and foreign authorities such as China's CQC, US UL, EU CE, and European DNV-GL certification, laying a solid foundation for the company's global layout. At the same time, the company has initially established a “indirect overseas going+global layout” two-wheel drive strategic model, and its export products have covered more than 40 countries and regions including Southeast Asia, Europe, and North America.

Offshore wind power has broad prospects for development, and the company's first-mover advantage is expected to grow further. With the advancement of technology and the reduction of costs, the number of offshore wind power projects has gradually increased, bringing new growth points to the wind power equipment industry. Bloomberg New Energy Finance predicts that the new installed capacity of the wind power industry will reach a new high of 124 GW in 2024. Among them, the installed capacity of onshore wind power will be 106 GW, and the new installed capacity of offshore wind power will be a record 18 GW. In the offshore sector, which has a first-mover advantage, the company has developed a 66kV prefabricated intelligent offshore boosting system and 72.5kV environmentally friendly gas-insulated switchgear, which can increase the fan capacity to 8-12 MW. The poolside boost increased from 35 kV to 66 kV.

Profit forecast and investment rating: The company is a leading enterprise in new energy electrical equipment. The company is expected to achieve operating income of 6.2/7.7/9 billion yuan in 2024-2026, with year-on-year growth rates of +26%, +23%, and +18% respectively; net profit to mother is 0.66/0.85/1.03 billion yuan, with year-on-year growth rates of +33%, +28%, and +21%, respectively. The PE corresponding to the current stock price is 13X, 10X, and 8X respectively. The company's business continues to grow rapidly, and we maintain the company's “buy” rating.

Risk warning: Industrial policy adjustment risk, market competition risk, raw material price fluctuation risk, high accounts receivable balance risk, overseas market expansion falls short of expectations.