Key points of investment
The increase in expenses put pressure on performance in the short term. Net profit due to 2024H1 fell 67.12% year on year to 2024H1, and the company achieved operating income of 0.799 billion yuan, an increase of 13.38% year on year; net profit to mother was 0.022 billion yuan, a decrease of 67.12% year on year. The company's three expenses, including sales expenses, management expenses, and R&D expenses, increased by 35.3802 million yuan over the same period last year. The main reason was to expand the fields of energy storage, semiconductors, data centers, etc., continue to increase the development of new products, new processes and product iterations, and increase in personnel; the implementation of the second phase of the equity incentive plan led to an increase in equity incentive costs; the company actively participated in international and domestic professional exhibitions, and increased travel and exhibition expenses. With 2024Q2, the company achieved operating income of 0.525 billion yuan, up 21.47% year on year, up 91.32% month on month; net profit to mother was 0.017 billion yuan, down 56.30% year on year, up 228.93% month on month.
Power electronics devices: We have a rich heritage in liquid cooling temperature control technology. The energy storage business advanced by leaps and bounds in 2024H1. The company's power electronics temperature control product business achieved revenue of 0.461 billion yuan, an increase of 24.06% year on year; gross profit margin was 14.99%, down 6.84 pct year on year, mainly affected by increased competition in the power electronics temperature control products industry. With comprehensive advantages such as precise temperature control, high reliability, high safety, and temperature uniformity, the company has now accumulated high-quality customers in the industry such as Ningde Era, Sunshine Power, CRRC, and China Airlines. In the first half of the year, the company's revenue in the field of energy storage and temperature control was about 0.363 billion yuan, an increase of about 46% over the previous year.
Industrial equipment: Prices in the downstream machine tool industry declined, and profitability was reduced by 2024H1. The company's CNC equipment temperature control product business achieved operating income of 0.313 billion yuan, down 1.06% year on year; gross profit margin was 28.47%, down 1.76 pct year on year. In March 2024, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which states that it will promote equipment upgrading and transformation in key industries and accelerate the promotion of energy equipment with advanced energy efficiency and energy efficiency levels. Looking ahead, we believe this policy will strongly promote demand for liquid thermostats and electrical box thermostats.
Expand businesses such as semiconductor manufacturing, hydrogen energy, data centers, etc., and create new growth points in various fields. The application fields of the company's industrial temperature control equipment are gradually expanding to semiconductor manufacturing, hydrogen energy, data centers, etc.
In the field of semiconductor manufacturing equipment, the company uses domestic substitution as the main line, and has expanded the 48th Research Institute of North China Huachuang, Chipper Microelectronics, Jingsheng Electromechanical, Huahai Qingke, Shanghai Microelectronics, and the 48th Research Institute of China Electronics Technology Group Corporation. In the field of hydrogen energy, the company's products are used in hydrogen production, refueling, etc., and has now expanded its customers to include Heidlisen and others. In the data center sector, PUE requirements continue to rise, and the liquid cooling penetration rate is expected to increase. With the advantages of liquid cooling technology, the company launched supporting products for plate liquid cooling and immersion liquid cooling.
Profit forecasting and valuation
The profit forecast was lowered and the “buy” rating was maintained. Considering the decline in profitability due to intense competition in the industry, we lowered our profit forecast for 2024-2026. The company's net profit for 2024-2026 is 0.152, 0.269, and 0.393 billion yuan respectively (net profit to mother for 2024-2026 was 0.268, 0.36, 0.466 billion yuan before the reduction), and the corresponding EPS is 0.90, 1.59, and 2.33 yuan/share, respectively, and corresponding PE is 29, 16, and 11 times, respectively. The company is a leading domestic industrial temperature control equipment company, expanding businesses in various fields such as energy storage temperature control+industrial equipment temperature control+data center temperature control to drive subsequent growth. Maintain a “buy” rating.
Risk warning: The development of the energy storage industry falls short of expectations; market competition increases risk; risk of fluctuations in raw material prices.