Incident: The company released its 2024 mid-year report. In the first half of 2024, it achieved total revenue of 0.591 billion yuan, a year-on-year increase of 34.68%, and achieved net profit to mother of 0.088 billion yuan, an increase of 398.07% over the previous year.

Key points of investment

Operating income and net profit to mother increased dramatically, and net cash flow improved: In the first half of 2024, the company achieved operating income of 0.591 billion yuan, an increase of 34.68% over the previous year, mainly due to the expansion of the company's production and operation scale and continuous exploration of new markets and application fields. The operating income of customized 3D printing products and 3D printing self-developed equipment all increased. Net profit to mother and net profit after deducting net profit from mother were 0.088 billion yuan and 0.054 billion yuan respectively, with year-on-year increases of 398.07% , 7747.54%, mainly due to a significant increase in operating income and a decrease in share payment fees during the reporting period. In the first half of 2024, the company achieved net cash flow from operating activities of -0.267 billion yuan, a decrease of 0.015 billion yuan compared to the same period last year, mainly due to an increase in the company's sales repayments.

R&D investment increased, net assets and total assets grew steadily: In the first half of 2024, the company's total R&D investment was 0.108 billion yuan, accounting for 18.26% of revenue. The total R&D investment increased by 28.60% over the same period of the previous year, mainly due to the company's continuous increase in technology research and development innovation efforts. The number of R&D personnel and their remuneration and direct investment in R&D activities increased. However, due to the sharp increase in revenue over the same period of the previous year, the ratio of R&D investment to operating income decreased by 0.87 percentage points. The company continues to adhere to customer-centered, market-oriented, and R&D innovation as the driving force for the company's development, further expanding its business scale, continuously developing new products and processes, and enhancing market promotion efforts.

Furthermore, as of the first half of 2024, the company's net assets reached 4.869 billion yuan, a year-on-year increase of 2.09%, mainly due to an increase in share capital and capital reserves due to the exercise of employee equity incentives during the reporting period and an increase in undistributed profit due to company profits; the company's total assets reached 6.733 billion yuan, an increase of 2.52% year over year, mainly due to increased accounts receivable and inventory in the first half of 2024.

The company has become a leader in the field of metal additive manufacturing in China, and its technology and production capacity have reached the international advanced level: as of June 2024, the company has established cooperative relationships with nearly 2,800 organizations, participated in the construction of several key models in the country, and became a leading enterprise in the field of metal additive manufacturing in China. The company's business covers the entire metal additive manufacturing industry chain, and is widely used in various fields such as aerospace, industrial machinery, energy and power. In the aerospace field, the company has a high market share of customized metal 3D printing products, and has established close cooperative relationships with China Aviation Industry, Aerospace Science and Technology, etc. The company is not only a qualified supplier to Airbus, but also signed a joint development agreement with it for metal 3D printing of large precision parts of A350 aircraft, marking that the company has reached a world-class level in metal 3D printing process technology and production capacity.

Profit forecast and investment rating: The company's performance is in line with expectations. Considering the rapid expansion of 3D printing technology application scenarios and the company's central position in the industry, we maintain our previous forecast. The company's net profit to mother for 2024-2026 is 0.332/0.501/0.686 billion yuan, respectively, corresponding to PE of 38/25/18 times, respectively, maintaining a “buy” rating.

Risk warning: 1) the risk of concentrated downstream customer areas; 2) the risk of reliance on imports for key core components of additive manufacturing equipment; 3) risk of core competitiveness.