Incident: The company released its 2024 mid-year report. 2024H1 achieved revenue of 0.842 billion yuan (-6.84% YoY), achieving net profit of 0.14 billion yuan (YoY -16.15%); with 2024Q2, the company achieved revenue of 0.565 billion yuan (+4.30% YoY, +104.21%), and achieved net profit of 0.099 billion yuan (YoY -7.09%, YoY +143.01%).

Energy-saving household shielding pumps are under pressure for a short period of time, and the richness of the product structure has increased: In 2022, the Russian-Ukrainian conflict led to a significant rise in European gas prices. The sales volume of the company's core product, household shielding pumps, benefited from the expansion of energy-saving pumps and heat pump ancillary products in the European market. Since 2024, due to short-term pressure from the European market due to inventory removal, the overall sector achieved revenue of about 0.34 billion yuan, a year-on-year decrease of about 14%. The company sold about 0.47 million units of energy-saving pumps of various types during the reporting period, a year-on-year decrease of about 39%; the number of units sold of heat pump ancillary products decreased by about 42% under the same caliber. However, the increase in the penetration rate of energy-saving products and heat pumps is still a long-term trend, and sales are expected to gradually recover in the future. Looking at other product lines, sales of traditional agricultural pump products are hampered by fluctuations in the market environment, but the sector's performance achieved revenue of about 0.305 billion yuan, which is basically the same year on year; in the industrial pump sector, against the backdrop of declining product revenue in the chemical sector, the company developed new product segments, driving the overall sector to achieve revenue of about 0.13 billion yuan, which is the same as the previous year; in terms of liquid cooling pumps, the company is actively expanding the field of new energy vehicles while continuing to track emerging fields such as energy storage and IDC data centers, which are currently being completed With breakthroughs from key benchmark customers in industries such as Xing, Shuguang, and Invek, it is expected that 2024H2 will achieve small-batch order sales. Driven by this, the company achieved revenue of about 0.028 billion yuan during the reporting period, an increase of about 48% over the previous year.

The countertrend layout was gradually implemented, and the product structure was actively adjusted: during the reporting period, the company actively adjusted the segmented product structure while strengthening the contrarian layout. 2024H1 completed the relocation of the new production capacity base in Wenling, and the pace of automation and digital transformation of the company's manufacturing was further implemented. Looking forward to the future, the company will continue to promote the construction of a new production capacity base in Hefei and continue to promote lean transformation of the new Wenling plant. In addition, it will actively explore new market segment opportunities and shift the form of a single product to a product portfolio and comprehensive solution.

Implement an interim dividend to highlight the value of the dividend: According to the company announcement, the company plans to implement the 2024 interim dividend and will distribute a cash dividend of 82.48 million yuan (tax included). In the first half of 2024, the company spent 30.89 million yuan to implement share repurchases. The combined cash dividends and repurchase amounts for the 2024 semi-year account for 80.96% of 2024H1's net profit to mother. In recent years, the company has continued to maintain high dividends. The dividend payment rates for 2019-2023 were 48.12%, 78.53%, 39.66%, 44.77%, and 69.59%, respectively, effectively protecting shareholders' interests.

Investment suggestions: We expect the company's revenue for 2024-2026 to be 2.038 billion yuan, 2.228 billion yuan, and 2.434 billion yuan respectively, with growth rates of 8.4%, 9.3%, and 9.3%; net profit of 0.278 billion yuan, 0.307 billion yuan, and 0.338 billion yuan respectively, with growth rates of -2.6%, 10.2%, and 10.3% respectively; maintain the buy-A investment rating and give 2024 12 times PE, corresponding to a 6-month target price of 20.02 yuan.

Risk warning: demand falls short of expectations, industry competition intensifies, raw material prices rise