Incident: 2024H1 achieved net income of 0.84 billion yuan, -6.84% year over year; realized net profit of 0.14 billion yuan, -16.15% year over year; realized net profit of 0.1 billion yuan without return to mother, or -35.84% year on year.

2024Q2 achieved operating income of 0.57 billion yuan, +4.30% year over year; realized net profit of 0.1 billion yuan, -7.09% year over year; realized net profit deducted from mother 0.07 billion yuan, or -37.24% year on year. The company pays a cash dividend of 0.5 yuan (tax included) per share, totaling 0.082 billion yuan, then the total 2024H1 cash dividend and repurchase amount is expected to be 0.113 billion yuan, accounting for 80.96% of net profit due to mother in the first half of the year.

Comment:

The impact of heat pump removal is weakening, and the company's H2 is expected to accelerate. The company achieved revenue of 0.84 billion yuan in the first half of the year, -6.84% year-on-year, mainly due to the short-term impact of the European market storage and consolidation cycle on the export sales of the household shielding pump sector. On the trend, the company's revenue growth rate returned to growth in the second quarter, and judging from quarterly data, China's compression heat pump Q2 exports improved month-on-month. In the context of global energy saving and carbon reduction and countries' energy security strategies, medium- to long-term demand for energy-saving circulation pump products has a strong foundation. By business segment: 1) Civil pumps, 24H1 achieved sales revenue of about 0.305 billion yuan, which was the same overall year on year. Among them, industrial and commercial related products generated revenue of about 0.02 billion yuan, and the year-on-year growth rate was over 200% on a low base. 2) In the household shielding pump business, 24H1's revenue was about 0.34 billion yuan, or -14%. Of these, energy-saving pumps sold about 0.47 million units, -39% year-on-year, and the number of heat pump ancillary products sold was -42%. 3) In the industrial pump business, 24H1 revenue was about 0.13 billion yuan, the same year on year, with sales revenue of chemical products -7% year-on-year. 4) In the liquid cooling pump business, 24H1's revenue was about 0.028 billion yuan, +48% over the same period. It has now completed breakthroughs with key benchmark customers in the industry such as ZTE, Shuguang, and Invic. It is expected that small-batch order sales will be achieved in the second half of the year. 24H1's electronic pumps for lithium battery vehicles generated revenue of about 0.019 billion yuan, an increase of more than 6 times over the same period last year.

Profitability is under pressure in the short term. Affected by factors such as fluctuations in raw material prices and changes in product structure (such as energy-saving pumps and heat pump ancillary products falling a lot), the company's 24Q2 gross margin was under short-term pressure, -5.0 pct to 28.2% year over year. On the expense side, 24Q2 sales/management/R&D/finance expenses rates were 5.4%/4.4%/3.9%/-0.9%, respectively, +0.9/-0.8/+0.2/+1.9pct, and exchange earnings in the second quarter decreased year on year. Thanks to asset disposal revenue of 3600+ million yuan, the company achieved a net interest rate of 17.6% to mother in 24Q2, -2.1 pct year on year.

Investment advice: Dayuan Pump Industry is a domestic shielded pump faucet. Civilian pumps, household pumps, industrial pumps, and liquid cooling pumps go hand in hand. It has a complete product matrix, leading technical manufacturing, and strong horizontal business expansion capabilities. The company's diversified business development logic is clear: the long-term trend of increasing the penetration rate of energy-saving products in the household shielding pump business is still clear. Industrial pumps are consolidating basic business areas and actively developing new segments. Commercial pumps contribute marginal increases. The net profit for 24-26 is estimated to be 0.29/0.32/0.38 billion yuan (previous value 0.34/0.39/0.46 billion yuan), considering that the revenue growth of H1 household shielding pumps, industrial pumps and other businesses slowed down compared to 23, and the year-on-year decline in gross margin in Q2. (Expected), corresponding price-earnings ratios for 24-26 are 10.5x/9.3x/7.9x, respectively, maintaining a “buy” rating.

Risk warning: Market competition increases risk; risk of fluctuating raw material prices; management risk due to rapid expansion of scale.