Incidents:

The company announced its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 18.943 billion yuan, a year-on-year increase of 4.02%; achieved net profit attributable to shareholders of listed companies of 2.162 billion yuan, an increase of 28.56% over the previous year; and diluted earnings per share was 1.21 yuan/share, an increase of 27.15% year-on-year.

Comment:

The company's revenue is growing steadily, and net profit to mother is growing faster

By business, in the first half of 2024, the company's coal machine segment and auto parts segment all achieved steady growth. Among them, benefiting from the growth of hydraulic supports and coal machine equipment, the company's coal machine segment achieved total operating revenue of 9.804 billion yuan, an increase of 4.41% year on year; achieved net profit of 2.068 billion yuan to mother, an increase of 27.61% year on year. The company's auto parts division achieved total revenue of 9.149 billion yuan, an increase of 3.58% over the previous year. Among them, ASIMCO achieved overall revenue of 2.671 billion yuan, an increase of 20.37% over the previous year. The company's net profit to mother grew rapidly, with a year-on-year increase of 28.56% during the reporting period.

Profitability has improved, and the company's investment business is progressing smoothly

The company's main profitability indicators improved to varying degrees in the first half of 2024. During the reporting period, the company's gross profit margin and net profit margin were 24.08% and 12.31%, up 1.95pct and 2.38pct respectively over the same period in '23; the company's average return on net assets was 10.45%, up 1.25pct from the same period in '23. According to the disclosure of the company's semi-annual report, the company's investment business progressed smoothly. During the reporting period, the company's shareholding company Suda Shares's IPO application obtained approval from the China Securities Regulatory Commission; the participating company Luoyang Bearing Group Co., Ltd. completed the shareholding system reform and has now carried out IPO counseling.

Profit forecasting

Under a neutral scenario, we adjusted the company's projected revenue for 2024-2026 to 39.747, 43.619, and 47.729 billion yuan; corresponding net profit to mother of 3.934, 4.402, and 4.921 billion yuan, EPS was 2.20, 2.46, and 2.76 yuan/share, respectively, corresponding to 5.34 times the 2024 PE. Maintain the company's “gain” rating.

Risk warning

Market competition risk: As the production capacity of the coal industry continues to be optimized, the number of newly built coal mines and the number of coal mines produced in the country has decreased, and the industry faces the risk of increased competition.

Risk of changes in downstream demand: If demand in the downstream automobile and coal industries declines in the future, it will have an impact on the company's business revenue and operating performance.

The economic growth rate is lower than expected: industry growth mainly depends on the increase in fixed asset investment. In the case of fluctuating or sluggish macroeconomic growth, industry demand will be affected.

Risk of fluctuations in raw material prices: Changes in commodity prices such as steel will cause the company's production costs to rise.