Revenue increased sharply year over year, and gross margin increased. In the first half of 2024, the company's revenue was 4.831 billion yuan, up 28.33% year-on-year, mainly due to the company's expansion of domestic and foreign petrochemical and natural gas product markets. Among them, revenue from high-end equipment manufacturing and new materials was about 1.057 billion yuan, up 40% year on year; revenue from seamless pipes was 2.076 billion yuan, up 20.89%; revenue from welded pipes was 1.067 billion yuan, down 16.01%; revenue from composite pipes was 0.642 billion yuan, mainly due to the acquisition of Jiuli last year to develop new market performance; pipe fittings revenue was 0.388 billion yuan, an increase of 37.90%, mainly due to the company's prefabricated parts business and overseas sales of high-value products This led to an increase in performance; revenue from alloy materials was 0.345 billion yuan, an increase of 177.42%, mainly due to alloy companies increasing production and expanding the middle and high-end markets.

The company's overall gross profit margin was 24.91%, an increase of 1.99 pct; of these, the gross profit margin of seamless pipes was 30.02%, an increase of 1.15 pct; the gross profit margin of welded pipes was 22.35%, a decrease of 1.23pct; the gross profit margin of composite pipes was 24.32%, an increase of 29.72 pcts; the gross profit margin of pipe fittings was 23.71%, an increase of 8.79 pcts; and the gross profit margin of alloy materials was 23.75%, the same increase of 18.55pct.

q The project under construction is progressing smoothly, and overseas market development has achieved results. In terms of project construction, the company promoted the construction of projects under construction in an orderly manner, involving various key areas such as the manufacture of special alloy pipeline prefabricated parts, automated upgrading, and corrosion-resistant pipeline production. Among them, the “Special Alloy Pipeline Prefabricated Parts and Pipe Maintenance Service Project with an Annual Output of 5,000 Tons” and the “Prefabricated Pipe Construction Project” have reached 100% and partially transferred to fixed assets; the progress of the “Special Metallurgical Phase II Project” has reached 90%, and the “High-precision Super Long Pipe Project” has reached 65%. Overall, overseas market development has achieved remarkable results. The company's overseas sales revenue increased 61.34% year on year. As the company continues to deepen its international market layout and strengthen brand building, overseas business is expected to become an important driving force for the company's long-term growth.

The expense ratio declined during the q period, and net profit declined year-on-year. The company's cost rate for the period was 9.39%, a decrease of 1.57pct.

Among them, the sales expense ratio was 3.60%, down 0.49 pct, mainly due to lower market fees and share payment fees; the management fee ratio was 3.24%, up 0.03 pct; the R&D expense ratio was 3.85%, down 0.26 pct; and the financial expense ratio was -1.30%, down 0.84 pct, mainly due to the increase in interest income on current deposits. The company's two impairment losses totaled 0.07 billion yuan in the first half of the year, an increase of 0.02 billion yuan, mainly due to falling inventory prices. The company's net investment income was 0.026 billion yuan, a year-on-year decrease of 0.413 billion yuan, mainly due to the large return on long-term equity disposal in the same period last year. Overall, the company achieved net profit of 0.644 billion yuan in the first half of 2024, a decrease of 9.56%.

q Cash flow has improved, and debt ratios have declined slightly. In the first half of the year, the company's revenue ratio was 1.0767, up 9.09pct; the pay-to-cash ratio was 1.1409, up 1.19pct. Taken together, the net operating cash inflow was 0.228 billion yuan, with a year-on-year increase of 0.342 billion yuan, mainly due to a sharp increase in net cash inflows from capital recovery and product purchases; the net cash outflow from investment activities was 0.214 billion yuan, an increase of 0.524 billion yuan over the previous year, mainly due to the increase in fixed asset investment in the current period, and the company disposed of joint venture shares last year. The company's balance ratio was 42.37%, down 0.38pct from the end of last year.

q Investment advice: The company is actively exploring overseas markets, and orders have begun to increase. The company is expected to achieve net profit of 1.529, 1.746, and 1.932 billion yuan in 2024-2026, corresponding PB of 2.3, 2.0, and 1.7 times, maintaining a “highly recommended” rating.

q Risk warning: raw material price fluctuation risk, company operation risk, policy change risk.