Incident: The company released its 2024 semi-annual report. 2024H1 achieved operating income of 18.94 billion yuan, a year-on-year increase of 4.0%, and achieved net profit to mother of 2.16 billion yuan, an increase of 28.6% over the previous year. 2024Q2 achieved operating income of 9.28 billion yuan, a year-on-year increase of 3.1%, and realized a net profit of 1.12 billion yuan to mother, an increase of 24.6% over the previous year.

Profit side achieved rapid growth.

The coal machine sector contributed mainly to profit growth and product structure optimization. In the first half of 2024, the company's coal machine sector achieved revenue of 9.8 billion yuan, a year-on-year increase of 4.4%, and net profit of 2.16 billion yuan, a year-on-year increase of 26.4%. The overall revenue of the coal machine sector maintained a steady rise, mainly due to the growth of hydraulic supports and coal machine equipment. The profit side growth was mainly due to product structure optimization, an increase in the proportion of high-margin products, and a decrease in material costs. Currently, coal is still the main energy source in China and plays a “ballast stone” role in safeguarding the country's energy security. Intelligent coal mine construction is of great significance in promoting the transformation and upgrading of the coal industry and achieving high-quality coal development. The company leads the market for intelligent control systems for comprehensive coal mining work surfaces, and the intelligent work surface technology is being promoted smoothly in the coal mine field.

The transformation of auto parts continues to advance, and profitability has improved dramatically. In the first half of 2024, the company's auto parts segment achieved revenue of 9.15 billion yuan, up 3.6% year on year. Among them, ASIMCO achieved revenue of 2.67 billion yuan, up 20.4% year on year, mainly due to rapid growth in the new energy vehicle parts business and steady rise in commercial vehicle business. SEG achieved revenue of 6.41 billion yuan, a decrease of 3.3% year on year; net profit was 0.18 billion yuan, up 71.8% year on year. The first was the contribution of ASIMCO revenue growth to profit. The second was SEG's cost reduction Efficiency gains have been significant, and profitability has been greatly improved. In the first half of 2024, China's automobile sales were 14.047 million vehicles, up 6% year on year. Among them, sales of new energy vehicles reached 4.944 million units, up 32% year on year, and the market share reached 35%. The automobile industry is in the new energy transition window. The company continues to dig deeper into the passenger car market, steadily expand the commercial vehicle market, vigorously explore the new energy market, and accelerate the electrification transformation of the auto parts sector.

New progress has been made in the investment business, and capital has enabled industrial transformation and upgrading. The company's shareholding company Suda Co., Ltd.'s IPO application obtained approval from the China Securities Regulatory Commission and was listed on September 3, 2024; the participating company Luoyang Bearing Group Co., Ltd. completed the shareholding system reform and has now carried out IPO guidance, and has a foundation for entering the capital market. The company continuously optimizes its industrial layout, explores opportunities in emerging fields, and empowers high-quality enterprise development with capital.

Profit forecasting and investment advice. The company's net profit to mother for 2024-2026 is estimated to be 3.75, 4.07, and 4.42 billion yuan, respectively. Corresponding to the current share price PE, it is 5.6, 5.1, and 4.7 times, respectively. The compound net profit growth rate for the next three years will be 10.5%. Considering the steady development of the company's coal machine sector, the profitability of the auto parts sector continued to recover. The company was given a target market value of 26.7 billion yuan in 2024, corresponding to a target price of 14.93 yuan. It was covered for the first time, and a “buy” rating was given.

Risk warning: Risks such as fluctuations in raw material prices, market decline and increased competition, exchange rate fluctuations, and changes in investment returns and fair value.