Incidents:
Jinchuang Group released its 2024 mid-year report on August 28:2024H1 achieved revenue of 1.962 billion yuan, up 12.99% year on year; realized net profit of 0.147 billion yuan, up 25.70% year on year; realized net profit deducted from mother 0.139 billion yuan, up 22.83% year on year.
Investment highlights:
There was a steady increase in 2024H1 orders, and subway business revenue was +30% year-on-year. By business, 2024H1 achieved revenue of 1.119 billion yuan for urban rail and subway vehicles, up 30.49% year on year; EMU vehicle accessories achieved revenue of 0.459 billion yuan, down 1.33% year on year; electronic communication equipment achieved revenue of 0.077 billion yuan, down 21.88% year on year; ordinary bus vehicle accessories achieved revenue of 0.055 billion yuan, up 103.18% year on year; special vehicles achieved revenue of 0.052 billion yuan billion yuan, a year-on-year decrease of 57.06%; other businesses achieved revenue of 0.199 billion yuan, an increase of 19.71% year-on-year. In terms of orders, 2024H1 signed a new contract/order exceeding 2.6 billion yuan (tax included, excluding India's 3C business), an increase of 18% over the previous year. 2024Q2 achieved revenue of 1.072 billion yuan, up 12.74% year on year and 20.45% month on month; realized net profit of 0.104 billion yuan, up 15.42% year on year, up 139.77% month on month; realized net profit without return to mother 0.098 billion yuan, up 7.23% year on year, up 140.13% month on month.
2024H1's gross margin has increased steadily, and R&D investment has continued to increase. 2024H1's gross margin was 25.56%, up 1.12 pct year on year; net margin was 7.06%, up 0.67 pct year on year.
By business, the gross margin of 2024H1's urban rail and subway vehicle ancillary products was 23.58%, the gross margin of EMU vehicle ancillary products was 24.79%, the gross margin of electronic communication equipment was 24.59%, the gross margin of ordinary bus vehicle ancillary products was 30.63%, the gross margin of special vehicles was 26.36%, and the gross margin of other businesses was 37.20%. The 2024H1 company's expense ratio for the period was 18.81%, up 3.13pct year on year, with sales expenses of 0.107 billion yuan, up 17.50% year on year; management expenses were 0.148 billion yuan, up 7.73% year on year; R&D expenses were 0.092 billion yuan, up 18.04% year on year; and financial expenses were 0.023 billion yuan.
The main rail transit industry is expected to benefit from maintenance needs, and the heavy industry sector can be expected in the future. The company's main rail transit products include three series of interior decoration, equipment, and electricity, covering more than 1,000 product segments such as door systems, seats, and kitchens. Currently, it fully covers all major domestic EMU models and major urban rail vehicles, and is exported to rail transit vehicle projects in dozens of countries. Intensive maintenance demand for EMUs and urban rail vehicles is expected to drive the upgrading of rail transit equipment, and the company's main rail transit business is expected to grow further. At the same time, the company's heavy industry sector has successively launched new products such as the CKJ-2000E terminal wheel loader, the CKW1250F 125T mining excavator, and the CKD130HC methanol extended range wide-body dump truck to continue to help the construction and development of smart ports and zero-carbon mines. The heavy industry sector can be expected to grow in the future.
Profit forecast and investment rating We expect the company to achieve revenue of 4.107, 4.538, and 5.05 billion yuan in 2024-2026, and achieve net profit of 0.358, 0.434, and 0.527 billion yuan. The current price corresponds to PE of 15, 13, and 10 times, respectively. The company is a domestic rail transit interior and equipment leader. The heavy industry sector can be expected in the future and covered for the first time, giving it a “buy” rating.
Risks suggest that tenders in the downstream rail transit industry fall short of expectations; industry competition increases risk; risk that the expansion of the heavy industry sector falls short of expectations; risk of falling gross margin; risk of changes in preferential tax policies; exchange rate risk; and risk of overseas business operations.