The company announced 2024H1 results. Operating revenue for the first half of the year, net profit to mother, net profit after deducting non-net profit of 6.836, 0.628, and 0.611 billion yuan, compared with -5.1%, +10.35%, and +15.9%, respectively.

Steady growth in performance. The company's revenue for the first half of 2024, net profit to mother, net profit after deducting non-net profit of 6.836, 0.628, and 0.611 billion yuan, were -5.1%, +10.35%, and +15.9%, respectively. Among them, Q2's revenue was 4.026 billion yuan, up 3.38% year on year, and net profit after deducting non-profit of 0.391 and 0.385 billion yuan, respectively, -4.26% and +0.43% year-on-year.

Gross margin has increased, and profit indicators are improving. In 2024, H1 achieved a gross profit margin of 20.90%, a year-on-year increase of 2.17pcts, a net profit margin of 10.58%, and an increase of 1.50pcts year-on-year. The company's sales expense ratio, management expense ratio, and financial expense ratio were 3.22%/2.96%/-0.42%, respectively, up 1.06 pcts/0.65 pcts/improved 0.03 pcts year on year, respectively. The increase in sales expenses was affected by the construction of the company's second-level marketing system.

The main business remained stable. The situation of the company's various business segments in the first half of the year: intelligent power conversion and distribution systems 2.123 billion yuan, year-on-year -2.09%, gross profit margin -0.42pcts; smart meters: revenue 1.599 billion yuan, +9.90%, gross profit margin 27.56%, year-on-year +1.39pcts; intelligent medium voltage power supply equipment: revenue 1.416 billion yuan, +5.01% year-on-year, gross profit margin 20.33%, year-on-year +5.34pcts; new energy and system integration:

Revenue 0.999 billion yuan, -29.74%, gross profit margin 6.50%, +0.08pcts; charging and switching equipment and other manufacturing services: revenue 0.55 billion yuan, -0.91% YoY, gross profit margin 12.44%, +1.25pcts yoy; DC transmission system: revenue 0.148 billion yuan, -41.70% YoY, gross profit margin 51.50%, YoY +2.33pcts. Various businesses are developing steadily, and the DC business fluctuates due to the pace of converter valve delivery.

Winning bids continued to grow, and off-line and overseas business expansion achieved results. In the first half of 2024, the company won bids for 1-4 batches of substation equipment for the State Grid transmission and transformation project, with a year-on-year increase of 20%, with a market share of 2%, ranking in the top ten. The converter valve won the bid of 0.179 billion yuan for the Qinghai-Tibet Phase 2 expansion project. The company's electricity meters (Xu Ji Meter, Shandong Electronics, Harbin Watch Institute) ranked first in the share of the State Grid. In addition, the company is actively expanding the off-grid market and providing customized smart distribution grid solutions. In terms of overseas business development, the company achieved revenue of 0.148 billion yuan in the first half of the year, an increase of 84.24% over the previous year, and has successfully broken through the Middle East, Europe, America, Southeast Asia and other markets.

UHV and distribution network construction may bring flexibility. UHV tenders are expected to be more intensive in the second half of the year. The company is leading in DC converter valve technology. At the same time, the Seafeng flexible market has a clear first-mover advantage, and the company is expected to benefit. The company's intelligent power conversion and distribution business segment benefits from the automated upgrading and transformation of distribution networks, which may also bring some flexibility.

Investment advice: The estimated net profit of the company in 2024-2025 is 1.215 or 1.516 billion yuan, corresponding to 25 or 20 times the valuation, maintaining the “increase” rating.

Risk warning: Power construction falls short of expectations, the company's bid falls short of expectations, and overseas business progress risks.