Revenue achieved relatively rapid growth, and profit growth showed impressive performance

24H1 achieved revenue of 1.797 billion yuan, +33.43% YoY, 0.13 and 0.123 billion in non-net profit, +48.89% and +47.60% YoY; 24Q2 achieved revenue of 1.138 billion yuan, +47.82% YoY, net profit to mother 0.091 billion yuan, +71.14% YoY, minus non-net profit 0.092 billion, +63.36% YoY. The high increase in Q2 profit in a single quarter was mainly due to faster revenue growth, with significant year-on-year improvement in gross margin.

Gross margin increased year-on-year, and the expansion of the base is expected to increase module manufacturing capacity. By business, the company's industrial module design, manufacturing, and engineering services achieved revenue of 0.348 billion and 1.444 billion, respectively, with gross margins of 26.34% and 13.75%. The increase in the proportion of modularity led to an improvement in overall gross margin. The 24H1 comprehensive gross margin was 16.3%, +0.81 pct year over year, of which Q2 gross margin was 18.23%, +2.95 pct year over year. By region, domestic sales and export sales achieved revenue of 1.644 billion and 0.148 billion respectively, with gross margins of 15.23% and 26.94%. The company has sufficient orders in hand. In June, it won the bid for the fine chemical and raw materials engineering project of North Huajin United Petrochemical Co., Ltd. for 100 million tons/year hydrogen peroxide plant design, procurement and construction engineering (B+EPC) project, with a total order of 1.095 billion yuan. The company plans to raise 0.75 billion yuan through the issuance of convertible bonds for the Nantong Libert Heavy Industry Project (total investment of 1.295 billion yuan). The project is close to the Yangtze River entrance and covers an area of about 47,000 square meters. After completion, it may enhance the company's manufacturing capacity for multiple modules simultaneously.

Expense ratios were briefly under pressure, and net interest rates rose slightly

The cost ratio increased by 0.34 pct to 6.87% year on year during the 24H1 period, and the sales, management, R&D, and finance cost ratios were 0.63%, 3.91%, 2.22%, and 0.11%, respectively, with year-on-year changes of -0.11, -1.51, +1.42, and +0.54 pct, respectively. Asset and credit impairment losses in the first half of '24 were 0.014 billion, an increase of 0.016 billion over the previous year. Under the combined influence, 24H1 net interest rate increased 0.75pct to 7.24%, and the net interest rate for a single Q2 was 8%, +1.09pct year on year. 24H1's net operating cash flow inflow was 0.063 billion, a year-on-year decrease of 0.142 billion. The current payout ratios were 77.51% and 65.62%, respectively, with year-on-year changes of 25.55 pcts and -8.58 pcts.

Optimistic about the company's medium- to long-term growth potential and maintain a “buy” rating

The company is one of the few domestic enterprises with large-scale industrial module design and manufacturing capabilities and “design-procurement-modular-construction” (EPFC) full industry chain and integrated service capabilities. It can provide customers with customized project construction services, with customers all over the country and more than 30 countries overseas.

The execution and settlement of projects undertaken by 24H1 was good, and revenue increased significantly. At the same time, the company continued to implement lean management, further exploiting the cost reduction and efficiency mechanism, and achieved steady growth in performance. We expect the company to achieve net profit of 0.24, 0.31, and 0.38 billion in 24-26, corresponding PE of 15.2, 11.9, and 9.6 times, maintaining a “buy” rating.

Risk warning: raw material procurement prices rise; SOOC product sales fall short of expectations; market expansion falls short of expectations; management risks brought about by the expansion of business scale.