Incident: The company released its 2024 semi-annual report. 2024H1 achieved operating income of 33.457 billion yuan, a year-on-year increase of 11.84%, and achieved net profit of 1.691 billion yuan, a year-on-year decrease of 15.52%; 2024Q2 achieved operating income of 18.404 billion yuan, an increase of 21.09% year-on-year, and realized net profit to mother of 0.786 billion yuan, a year-on-year decrease of 20.08%.

The revenue scale of clean and efficient energy equipment is growing rapidly, and the gross margin of coal and power equipment is being phased under pressure due to the delivery of low-price orders. 2024H1's clean and efficient energy equipment business achieved revenue of 14.065 billion yuan, an increase of 41.03% over the previous year. Among them, the revenue growth rate of thermal power/ combustion engine/ nuclear power equipment was 15.99%/154.17%/60.43%, respectively. In terms of profitability, the gross margin of 2024H1 clean and efficient energy equipment decreased by 1.43 pcts to 16.70% year on year. Among them, the gross margin of combustion engine equipment was basically stable, the gross margin of nuclear power equipment increased 7.64 pcts to 23.35% year on year, and the gross margin of thermal power equipment decreased 2.58 pcts to 16.44% year on year in the context of low price order delivery, which had a certain impact on the company's profit.

The scale of revenue from renewable energy equipment has been rising steadily, and the subsidiary Dongfang Wind Power has turned a loss into a profit. 2024H1's renewable energy equipment business achieved revenue of 8.215 billion yuan, an increase of 18.59% over the previous year. Among them, wind power/hydropower equipment revenue growth rates were 19.14%/21.48%, respectively. In terms of profitability, the gross margin of 2024H1 renewable energy equipment decreased by 3.65 pcts to 8.84% year on year, with wind power/hydropower gross margin decreased by 2.86/3.99 pcts year on year to 7.44%/15.93%, respectively. Dongfang Wind Power, a subsidiary of the company, transferred the wind farm in June 2024 and successfully turned a loss into a profit.

The scale of new efficiency orders is growing steadily, and it is planned to further increase the dividend ratio. From January to June 2024, the company achieved a new effective order of 56.073 billion yuan, an increase of 14.77% over the previous year. Among them, autonomous technology gas turbines received the first market-based order, and new efficiency orders for the power plant service industry reached a record high for the same period (4.69 billion yuan). From January to July 2024, the company achieved a new effective order of 62.783 billion yuan, an increase of 19.2% over the previous year. Among them, new efficiency orders for coal/hydropower/power plant services increased by more than 37%/102%/30%, respectively. The company formulated the 2024 “Improve Quality, Efficiency, and Reward” action plan, and plans to further increase the dividend ratio in 2024.

Maintaining the A/H “buy” rating: Affected by the gradual delivery of low price orders for thermal power, the company's profitability showed a fluctuating trend. We lowered our profit forecast. The company is expected to achieve net profit of 3.8/5/6 billion yuan (down 13% /7% /3% reduction) in 24-26. The current stock price corresponds to 11/7 times the PE of A/H shares in 24 years, respectively. Under the rapid growth in the scale of new energy installations, thermal power units will still have room to grow on a certain scale as a “power ballast stone”. As a leading thermal power equipment company, the company is expected to maintain an increase in orders and revenue; in addition, the pumped energy storage and nuclear power businesses will also achieve steady growth in performance as project construction progress continues to advance, maintaining the “buy” rating of A/H shares.

Risk warning: The promotion and construction of domestic thermal power projects fell short of expectations, the promotion and construction of domestic nuclear power projects and pumped energy storage projects fell short of expectations, and increased competition in the industry caused large losses in the company's wind power business.