Event: The company announced its 2024 semi-annual results, 1) 24H1 achieved revenue of 10.28 billion yuan, gross profit margin of 27.8%, year-on-year -3 pcts, net profit to mother of 1.51 billion yuan, +31% year-on-year; 2) 24Q2 achieved revenue of 6.36 billion yuan, +16% YoY, +62% month-on-month, gross profit of 24.0%, year-on-year -6pcts, month-on-month net profit of 0.94 billion yuan, year-on-year +31% , +66% month-on-month, the delivery volume of major rail transit products increased, and power semiconductor devices, etc. continued to grow.
Rail transit equipment: Railway investment is growing rapidly, and the rail transit equipment business has strong growth momentum 1) 24H1 National railway fixed asset investment increased 11% year-on-year to a new high of 337.3 billion yuan, and the company fully benefited as a leader in rail transit equipment. 24H1's rail transit equipment achieved revenue of 6.14 billion yuan, +31% year over year. Among them, rail transit electrical equipment/rail construction machinery/communication signal systems/other rail transit equipment achieved revenue of 49.5/0.56/0.42/0.22 billion yuan respectively, +27%/+15%/+132%/+52% year-on-year respectively.
2) Railway investment is growing rapidly, and demand for rail transit equipment has been released. From January to July 2024, railways across the country sent 2.52 billion passengers, with a passenger turnover of 945.45 billion kilometers, +16%/+11% year-on-year respectively, all of which reached record highs. The recovery in railway passenger traffic is driving railway investment to continue to grow. On May 11, 2024, China Railway announced a tender for the 165 standard EMU with a speed of 350 kilometers per hour, which is the largest tender scale in the past 7 years. As a leading supplier of domestic rail transit traction and conversion systems, the company's market share has remained high for many years. As railway investment continues to grow and the company's rail construction machinery business continues to expand the passenger line and urban rail markets, the rail transit equipment business is expected to maintain high growth.
Emerging equipment: Production capacity was released smoothly, constructing a second growth curve 1) Benefiting from the steady increase in demand for new energy vehicles and new energy power generation, the company's emerging equipment business continued to grow. 24H1's Emerging Equipment achieved revenue of 4.09 billion yuan, or +9% year-on-year. Among them, power semiconductor devices/sensor devices/electric drive systems/industrial conversion products/offshore equipment achieved revenue of 17.5/1.4/0.9/0.9/0.41 billion yuan respectively, +27%/-47%/+8%/-4%/+18% year-on-year respectively.
2) The company's market share in the fields of new energy vehicles and photovoltaics continues to increase. According to the NE era, 24H1 has the second highest installed capacity of passenger car power modules in the industry; according to Solbi Photovoltaic Network, 24H1's PV inverters have won the fifth highest domestic standard. In addition, the company's medium- and low-voltage IGBT production capacity continues to increase. Yixing Phase 3 is expected to be put into operation, and high-voltage IGBTs for power grids and rail transportation will continue to be delivered. As production capacity continues to be released and new products are launched, the company's emerging equipment business is expected to maintain growth.
Profit forecast and investment rating: Considering that the company's downstream rail transit maintenance demand is at its peak and the emerging equipment business is progressing in an orderly manner, we raised the company's anticipated net profit to mother in 2024/2025 from 3.14/3.35 billion yuan to 3.62/4.38 billion yuan, and expected 2026 net profit to 4.88 billion yuan. The closing price of H shares on August 28, 2024 corresponds to PE 10.4/8.6/7.7 times, respectively, maintaining the “buy” rating.
Risk warning: Railway investment falls short of expectations; industry competition intensifies; overseas customer expansion falls short of expectations.