Incident: The company achieved revenue of 9.92 billion yuan in 2024H1, an increase of 12.10%; net profit to mother of 0.322 billion yuan, an increase of 10.23%; net profit of 0.275 billion yuan after deducting non-attributable net profit of 0.275 billion yuan, an increase of 5.93%. The reviews are as follows:

Q2 Revenue and profit have slowed, and overseas growth has been high; new 24H1 building decoration orders have steadily ranked first in the industry. On a quarterly basis, the company's 2024Q1 and Q2 revenue increased by 19.50% and 7.45% respectively, net profit to mother increased by 11.10% and 9.12%, respectively, and net profit after deducting non-return to mother increased by 21.87% and -14.13%, respectively. By industry, the company's building decoration industry and healthcare industry achieved revenue of 9.372 and 0.548 billion yuan respectively, with a year-on-year increase of 12.69% and 3.00% respectively. By region, mainland China, Hong Kong, Macao, Taiwan, and overseas achieved revenue of 71.22, 13.22, and 1.476 billion yuan respectively, up 5.09%, 50.62%, and 23.61%, respectively. The company signed a new 2024H1 building decoration order of 12.884 billion yuan, an increase of 14.22%. Among them, the curtain wall and photovoltaic construction, interior decoration and design business signed 8.26 and 4.624 billion yuan respectively, an increase of 8.9% and 25.14% respectively. Relying on its brand advantages, the total number of new 24H1 orders signed steadily ranked first in the industry, showing a prominent leading position.

Gross margin rose, net profit increased only slightly due to higher fair value losses, and Q2 operating cash flow improved sharply.

2024H1's gross margin increased 0.65 pcts to 15.63%; in terms of the period expense ratio, the 2024H1 expense ratio decreased 0.14 pcts to 9.96%, of which the sales expense ratio increased 0.14 pcts to 1.35%; the management expense ratio (including R&D expenses) decreased by 0.10 pcts to 7.89%; and the financial expenses ratio also decreased by 0.18 pcts to 0.73%. In addition, 2024H1's asset impairment and credit impairment losses were 0.031 billion yuan, and the impairment loss rate decreased by 0.23 pcts to 0.31%; fair value change earnings - 0.021 billion yuan, a decrease of 289.23%, mainly due to losses on current financial assets. Overall, 2024H1 net margin also increased by 0.02 pct to 3.92%. In terms of operating cash flow, the net operating cash flow of 2024H1 was 0.452 billion yuan, and the net outflow decreased by 63.87%. Among them, revenue increased 9.92 pcts to 104.64%, and current payments rose 2.67 pcts to 110.06%; 2024Q2 net cash inflow from operating activities was 0.516 billion yuan, and net inflow increased 1.484 billion yuan over Q1 and 0.717 billion yuan compared to 23Q2. Cash flow improved significantly in Q2. .

BIPV continues to expand, and overseas market development efforts are increasing. In the BIPV sector, 2024H1's photovoltaic construction project achieved revenue of 0.314 billion yuan, an increase of 124%; completed new green building benchmark projects such as Beijing's first carbon-negative demonstration building Shidai Center project, and Jianghe PV Module Factory has accepted many external customer orders in addition to internal orders, and market recognition continues to increase. In terms of overseas markets, the company's overseas division has returned to Middle Eastern countries such as Saudi Arabia and Dubai, and provides sales business for customized products such as curtain walls and photovoltaic modules to Australia, America, Japan and other regions (24H1 has undertaken the export business of curtain wall products from Australia). With the exploration of emerging markets and the acceleration of overseas exports of products, the company's overseas business is expected to usher in a new growth pole.

Profit forecasting and ratings. Under the overall pressure of the decoration industry, the company's leading position is prominent. New orders for 2024H1 building decoration have steadily ranked first in the industry, and interior decoration orders are growing rapidly. At the same time, with the general trend of green construction, the company already has a first-mover advantage in the field of photovoltaic construction. We are optimistic about the company's future performance. We expect EPS to be 0.65 and 0.72 yuan respectively in 24-25. The company's leading effect will be shown, giving a price-earnings ratio of 10-12 times in 24 years, a reasonable value range of 6.52 to 7.82 yuan, and maintaining a “superior to market” rating.