The company announced 2024H1 results. Operating revenue for the first half of the year, net profit to mother, and net profit after deducting non-net profit were 0.552 billion yuan, 0.141 billion yuan, and 0.138 billion yuan respectively, up 32.67%, 177.52%, and 192.26% year-on-year.

Significant increase in performance. The company's revenue, net profit, and non-profit for the first half of the year were 0.552 billion yuan, 0.141 billion yuan, and 0.138 billion yuan respectively, up 32.67%, 177.52%, and 192.26% year-on-year respectively. Among them, Q2's revenue was 0.32 billion yuan, up 44.78% year on year, and net profit after deducting non-profit of 0.077 and 0.076 billion yuan, up 114.83% and 121.12% year on year, respectively.

Profitability levels have recovered significantly. In 2024, H1 achieved a gross profit margin of 47.28%, a year-on-year increase of 12.74 pcts, a net profit margin of 25.58%, and a year-on-year increase of 13.35 pcts. In 2024, the H1 company's expense ratio was 16.03%, a year-on-year decrease of 2.89pcts. Gross margin has returned to historic levels. On the one hand, it is an update to the company's and customer pricing models, and it is also a reflection of the company's cost control and supply chain management efforts; at the same time, the company's cost ratio has been improved through internal cost reduction and efficiency.

Various business segments are growing strongly, and overseas market expansion has achieved remarkable results. In the first half of the year, the company's revenue by business segment: 0.385 billion yuan for composite external insulation for substations, 0.1 billion yuan for rubber seals, and 0.057 billion yuan for composite external insulation for transmission and transformation lines, up 34.98%, 19.58%, and 45.69%, respectively. In terms of divisions, the company's switch casing division's contract amount reached 48.8 million yuan, +136%; the overall substation composite external insulation products division contract amount was 0.536 billion yuan, +45% year over year; the overall transmission and distribution composite external insulation products division contract amount was 82.86 million yuan, +40% year over year, of which the overseas contract amount for transmission composite external insulation products was 42.95 million yuan, +152% year over year, and the Latin American market +213%. In the past, half of the company's business was overseas, and it is currently expanding its overseas layout, and its contribution to overseas markets is likely to increase further in the future.

Leading the development of high voltage power insulation and benefiting from major construction of global power grids. The current share of the new generation of long-life composite insulators promoted by the company continues to rise to 30-40%, and there is still plenty of room for improvement. The company participated in solving a series of bottlenecks in UHV insulation. It is a core supplier of UHV insulators, and has successfully provided more than 80% of composite insulator products for more than 70 UHV substations. The company has a very early presence overseas, with strong advantages. Overseas revenue exceeds half. Downstream customers include internationally renowned electrical equipment suppliers such as GEV, Hitachi Energy (formerly ABB Power Grid), and Siemens. At the same time, the products are also directly aimed at terminal power grid customers. The company's innovative cross-sharing scheme has obvious advantages over the current model. It has been actively promoting pilot and model projects in many domestic and South American countries. If this solution is applied in batches, it is expected to drive the company's business scale to a new level.

Investment advice: The estimated net profit of the company in 2024-2025 is 0.306 or 0.411 billion yuan, corresponding to a valuation of 30 or 23 times, maintaining a “highly recommended” rating.

Risk warning: grid investment falls short of expectations, overseas trade risks, fluctuating raw material prices.