On August 29, Huabao Xinneng released its 2024 semi-annual report.

The company released its 2024 mid-year report. In the first half of the year, the company achieved total revenue of 1.142 billion yuan, +24.02% year on year; net profit to mother of 72.8383 million yuan, reversing losses year on year; total operating income of 0.56 billion yuan, +18.46% year on year in Q2; realized net profit to mother of 43.8385 million yuan, +305.13% year over year. The performance was in line with previous forecasts.

Let's break it down. 1) The North American market achieved revenue of 0.65 billion yuan in the first half of the year, an increase of 33.9% over the previous year. The company actively expanded offline KA channels based on its leading edge in online channels. Currently, it has entered mainstream retail channel vendors including Costco, Harbor Freight Tools, Walmart, HomeDepot, Target, BestBuy, and Lowe's, and also launched a new generation of safe and fast charging outdoor power supplies, 1000Pro 2, and optical charging outdoor power supplies New flagship products such as 600Plus drove the company's rapid growth in the North American market; 2) The Asia-Pacific market achieved revenue of 0.35 billion yuan in the first half of the year, an increase of 52.6% year on year. The company made up the lithium iron phosphate product line quickly became popular in the Japanese market with outstanding volume and weight advantages, and sales performance improved rapidly; 3) The European market achieved revenue of 68.16 million yuan in the first half of the year, down 34.2% year on year; 4) points In terms of categories, the company's portable energy storage products/photovoltaic solar panel products achieved revenue of 0.91 billion yuan/0.22 billion yuan respectively in the first half of the year, up 18.7%/53.6% year-on-year respectively, and the solar panel support rate continued to increase.

Profit side. Q2 The company's gross margin increased by 9.6pct to 46.2% year-on-year, mainly due to the structural impact of falling cell prices, clearance of high-priced inventory, and increased revenue share of lithium iron phosphate products. On the expense side, the company's expense ratio fell 4.6pct to 40.7% year-on-year during the Q2 period, with sales/management/ R&D/finance rates changing -9.8pct/ -4.8pct/ -0.8pct/ +10.8pct, respectively. Sales and management expenses improved significantly year-on-year due to the dilution effect of fee reduction and revenue growth. The year-on-year increase in financial expense ratio was mainly affected by a sharp year-on-year decrease in exchange gain. Taken together, the company's Q2 net margin increased by 12.3 pct to 7.8% year-on-year. In terms of cash flow, Q2's net operating cash flow was 0.12 billion yuan, which was a year-on-year correction. It was mainly affected by a 39% year-on-year increase in cash received from the sale of goods and services (estimated to be an increase in revenue) and a 10% year-on-year decrease in cash from purchasing goods and receiving labor payments (presumed to be storage). The revenue ratio and net cash ratio were more than 1 times higher, and the profit quality was solid.

Profit forecasting and investment ratings. We expect the company's revenue for 2024-2026 to be 3 billion yuan, 3.7 billion yuan and 4.4 billion yuan, respectively, up 30%, 22%, and 20% year-on-year respectively. The estimated net profit to mother is 0.2 billion yuan, 0.3 billion yuan, and 0.35 billion yuan respectively. The corresponding PE will increase 49% and 17% year over year, respectively. The corresponding PE is 44.4 times, 29.9 times and 25.5 times, respectively, to maintain the “increase in holdings” investment evaluation grade.

Risk warning: Market demand falls short of expectations, industry competition intensifies, household storage business progress falls short of expectations, trade frictions intensify