Incident: On August 28, 2024, the company released its 2024 semi-annual report. 2024H1 achieved revenue of 1.788 billion, a year-on-year decrease of 25.4%; net profit to mother 0.422 billion, an increase of 44.71% year-on-year; net profit after deducting non-return to mother 0.153 billion, a year-on-year decrease of 40.67%. Among them, the main reason for the year-on-year decline in revenue was a sharp year-on-year decline in shipments in the first quarter of 2024, and the year-on-year decline in shipments in the second quarter narrowed. The company expects shipments to continue to recover in the second half of the year; non-recurring profit and loss mainly comes from the investment income confirmed by transferring 80% of the shares of Jiuquan Zhejiang Xinneng Wind Power Co., Ltd. about 0.273 billion yuan (before income tax).

Looking at the single quarter, 24Q2's revenue was 1.09 billion, down 17.65% year on year and 56.27% month on month; net profit to mother was 0.335 billion, up 109.45% year on year, up 285.6% month on month; net profit after deducting non-return to mother was 0.082 billion, down 43.26% year on year, up 16.63% month on month.

In terms of profit level, 24H1's gross margin was 19.14%, down 2.43 pcts year on year, deducted non-net interest rate of 8.56%, down 2.16 pcts year on year. 24Q2's gross margin was 17.46%, down 5.06 pcts year on year and 4.31 month on month; deducted non-net interest rate was 7.52%, down 3.43 pcts year on year and 2.51 pcts month on month.

Steadily promote the expansion of production capacity. As of 24H1, the company has an annual production capacity of 0.7 million tons of castings. The large-scale casting finishing project with an annual output of 0.1 million tons and an annual output of 0.12 million tons of large-scale offshore wind power finishing projects have been completed and put into operation, and a finishing design capacity scale of 0.22 million tons has been built; in addition, the large-scale casting finishing production line construction project with an annual output of 0.22 million tons is already in the implementation stage. Gansu Riyue “produces 0.2 million tons of wind power per year The “Key Components Project for Power Generation” will continue to increase production capacity and delivery capacity in 2024, and will be equipped with 0.1 million tons of casting and 0.1 million tons of finishing capacity.

Investment advice: We expect the company's 2024-2026 revenue to be 5.05/6.47/7.26 billion yuan, respectively, with a growth rate of 9%/28%/12%; net profit to mother of 0.7/0.77/0.92 billion yuan, respectively, with a growth rate of 46%/9%/20%, corresponding to the 24-26 PE of 15x/14x/12x. Considering the gradual release of industry demand, the company's new high-quality production capacity is about to be realized, the leading position in castings is stable, etc., maintaining the “recommended” rating.

Risk warning: downstream development falls short of expectations; market development falls short of expectations; sharp rise in raw material prices, etc.