Event: The company announces semi-annual results for 2024. In the first half of 2024, the company achieved operating income of 0.605 billion yuan, +24.22% year over year; realized net profit attributable to mother/net profit of 0.12/0.11 billion yuan, +32.40%/+32.25% year over year; net cash flow from operating activities was 0.069 billion yuan, or -41.96% YoY.

2024Q2's performance improved significantly, and gross margin increased. 2024Q2 achieved operating income of 0.323 billion yuan, +24.19%/+14.33% yoy, and net profit to mother 0.069 billion yuan, +32.00%/+34.75% yoy. 2024Q2 2024H1's gross margin/net profit margin was 32.60%/19.83%, +1.75pct/+1.22pct. By product, screw machine/other main business gross margin was 31.93%/30.55%, and +2.09pct/+2.82pct, 2024H1's revenue grew rapidly. We believe that as product sales increased, the scale effect continued to be reflected. At the same time, oil-free screw air compressors gradually formed a sales scale, and the company's gross margin increased.

Continue to promote R&D and innovation of high-end models, achieve mass sales of vacuum pumps and oil-free machines, and gradually launch centrifuges. By product, 2024H1's screw machine/other main business revenue was 0.474/0.118 billion yuan, respectively, +23.86%/+27.98% compared with the same period last year. In the first half of 2024, the company continued to promote R&D and innovation of high-end models and broaden its product line. Oil-free screw air compressors were shipped in small batches in 2023. Screw vacuum pumps were used in the industrial and food industries, and achieved good batch sales in 2023, and maintained a steady upward trend in 2024. The company increased investment in R&D, comprehensively upgraded products, and comprehensively enhanced the product competitiveness of vacuum pumps and oil-free screw machines. This series of product models has already been sold to semiconductor industry companies. The centrifugal compressor has completed phased application tests, and the product performance is stable. In March 2024, the ZMTB maglev centrifugal air compressor independently developed, designed and produced by the company was officially launched. The company will continue to steadily advance the testing work and accelerate the introduction of the product to the market.

The 2024 mid-term dividend plan was announced. On August 27, the company announced the 2024 semi-annual profit distribution plan. It plans to distribute a cash dividend of 1 yuan for every 10 shares, for a total cash dividend of 38.1774 million yuan, to provide investors with continuous returns.

Profit forecast: First coverage, giving the company an “gain” rating. In 2024-2026, we expect the company to achieve operating income of 1.176/1.461/1.787 billion yuan and net profit to mother of 0.221/0.289/0.371 billion yuan, corresponding PE 15.23x/11.62x/9.07x, respectively.

Risk warning: macroeconomic changes at home and abroad exceed expectations, market competition intensifies, high-end product promotion progress falls short of expectations, profit forecasts and valuation models fall short of expectations