Incident: The company released its semi-annual report. In 2014, H1 achieved revenue of 0.91 billion yuan, +7.37% year over year, and realized net profit of 0.167 billion yuan, +1.62% year over year; of these, Q2 achieved revenue of 0.468 billion yuan in a single quarter, +0.96% year over year and +5.69% month over month. Net profit to mother was 0.091 billion yuan, the same as the same period last year, +0.53% year over year and +20.78% month over month.
Comment: Performance is in line with expectations, revenue is generally stable, and profitability is still a highlight. The company's revenue increased slightly in the first half of the year, and continued to expand the application of amorphous products around the world with certain results. The company's gross profit margin in the first half of the year was 30.25%, +0.27pct year on year; net profit margin was 18.34%, -1.04pct year on year. Looking at a single quarter, Q2 achieved a gross profit margin of 30.26%, -0.49 pct year on year, +0.01pct month on month; net profit margin of 19.52%, -0.09pct year on year, and +2.43 pct month-on-month. Both gross margin and net margin remained high.
Amorphous production capacity is expected to increase, and increased performance can be expected. According to the company's 2023 annual report, the company's amorphous strip production capacity is 0.09 million tons. Revenue growth was moderate in the first half of the year due to no additional production capacity being invested.
Currently, the 0.015 million ton amorphous strip project under construction by the company is progressing smoothly. It is expected to reach production and sales in the second half of the year, contributing to the company's performance growth. Furthermore, both nanocrystalline strips and soft magnetic powder products have achieved sales growth, while gaining customer recognition in fields such as optical storage and new energy vehicles.
The sharp increase in R&D investment boosted the cost ratio, and the net operating cash flow matched profit. In terms of the cost ratio, the 24-year H1 expense ratio was 10.76%, of which the sales/management/R&D/finance ratio was 2.49%/2.12%/6.51%/-0.36%. R&D expenses in the first half of the year were 59.2736 million yuan, an increase of 65.61% year on year, and the innovation and development engine continued to be consolidated; the 24Q2 cost rate was 10.88%, +2.14pct year on year, of which the sales/management/R&D/finance ratio was 2.71%/1.79%/6.91% /- 0.53% The company achieved a net operating cash flow of 0.164 billion yuan in the first half of the year, and the net profit cash content was close to 100%.
The potential for amorphous products remains the same, demand in the transformer sector can be expected to grow, and the amorphous motor sector has ushered in important industrial progress. On August 13, the National Energy Administration issued the “Implementation Plan for High-Quality Distribution Grid Development Actions (2024-2027)”, which proposes to accelerate the task of promoting the construction and transformation of distribution grids. Amorphous transformers mainly used in distribution networks are expected to usher in new development opportunities. There has also been significant progress in the field of amorphous motors. On August 23, Ruipai Power, a subsidiary of GAC, released the mass-produced version of the amorphous alloy motor Quark 2.0, with an efficiency of 98.5%, a power density of 13 kW/kg, and a speed of 30,000 rpm. All three indicators are among the world's leading mass-produced motors. The advantages of amorphous strips used in high-speed motors have been greatly confirmed, and the prospects are worth looking forward to.
Investment advice: We expect the company to achieve net profit of 0.379/0.446/0.535 billion yuan in 24-26, corresponding to EPS of 3.16/3.72/4.46 yuan, maintaining the company's “gain” rating.
Risk warning: Risk of demand falling short of expectations, large fluctuations in raw material prices, and large exchange rate fluctuations.