Event: On August 27, 2024, the company released its 2024 semi-annual report. 24H1 achieved revenue of 1.926 billion yuan, a year-on-year decrease of 11.53%; realized net profit to mother of 0.161 billion yuan, an increase of 18.90% year-on-year.

Looking at 24Q2 alone, the company achieved revenue of 1.215 billion yuan, a year-on-year decrease of 21.98%; realized net profit to mother of 0.11 billion yuan, an increase of 11.12% over the previous year. In terms of regional revenue, 24H1 achieved revenue from mainland China of 1.451 billion yuan, a year-on-year decrease of 26%; revenue from outside of mainland China was 0.475 billion yuan, an increase of 116% year-on-year, and the share increased from 10% of 23H1 to 25% of 24H1.

The gross margin structure increased, and expenses increased slightly. The company achieved gross margin/net margin of 22.98%/8.31% respectively in 24H1, up 5.62 pcts/2.1 pcts year-on-year respectively. The increase in profitability is mainly due to the reduction in the company's R&D costs and structural improvements brought about by increased business in overseas markets. In terms of expenses, the company's 24H1 implementation period cost ratio was 13.36%, up 4.23pcts year on year. Among them, the finance/management/R&D/sales expense ratios were -1.15%/1.47%/4.03%/4.79%, respectively, with year-on-year changes of +1.22pcts/+0.82pct/+1.53pcts/+0.85pcts, respectively. Among them, the change in financial expenses was mainly due to higher exchange earnings in the previous period. The increase in the remaining expenses matched the expansion of the company's market and the incubation of new products.

PV inverters: The increase in overseas business is driving structural benefits in the sector. 24H1's photovoltaic inverter business achieved revenue of 1.383 billion yuan, up 6% year on year; achieved gross profit margin of 22.46%, up 2.61 pcts year on year. The increase in revenue and profit was mainly due to an increase in overseas inverter business. The company is one of the few photovoltaic inverter manufacturers in the industry with various technical routes such as centralized and string, and has full power band (3kW-8.8 mW) products. According to relevant statistics from S&P Global and Wood Mackenzie, the company ranked fourth in global shipments of photovoltaic inverter products in '23, and inverter shipments maintained the top ten global industry positions for 11 consecutive years.

Energy storage: System integration services have been reduced, leading to an increase in profitability. 24H1's energy storage bidirectional converter and system integration product business achieved revenue of 0.507 billion yuan, a year-on-year decrease of 37.96%; the gross profit margin was 22.67%, an increase of 10.85pcts year-on-year, mainly due to a decrease in the energy storage system integration business. The company is currently a leading supplier in the domestic energy storage converter market, and has relative technical and brand advantages. According to statistics from the Zhongguancun Energy Storage Industry Technology Alliance (CNESA), the company ranked first in the domestic market's energy storage PCS shipments for two consecutive years from 2021 to 2022. According to statistics from the EESA Energy Storage Leaders Alliance, in '23, the company ranked first in Chinese companies' domestic energy storage third-party high-power PCS215kW or more shipments.

Investment advice: We expect the company's revenue for 24-26 to be 6.785, 8.748, and 11.299 billion yuan, respectively, with growth rates of 37.6%, 28.9%, and 29.2% respectively; net profit to mother of 0.521, 0.705, and 0.95 billion yuan, respectively, with growth rates of 82.3%, 35.2%, and 34.9% respectively. Corresponding to the closing price on August 30, the company's 24-26 PE is divided into 25X, 18X, and 14X. Maintain a “Recommended” rating.

Risk warning: demand in the optical storage market falls short of expectations; overseas political risk factors, etc.