Investment summary

Incident Overview

On August 24, the company released the 2024 semi-annual report. In 2024H1, the company achieved operating income of 10.284 billion yuan, a year-on-year increase of 19.99%; net profit to mother was 1.507 billion yuan, up 30.56% year on year; net profit after deducting non-return to mother was 1.159 billion yuan, up 24.77% year on year.

Analysis and judgment

Consolidate the basic market of rail transit business and continue to tap the potential of the sector through the style of “new infrastructure”. In the first half of 2024, against the backdrop of a steady rise in railway passenger traffic and a sharp year-on-year increase in China Railway Group EMU tenders, the company continued to focus on the rail transit field, innovate and develop emerging industries, and its market share remained stable. 2024H1's rail transit equipment business segment achieved revenue of 6.139 billion yuan, YOY +30.87%. 2024H1, the company continues to promote the development of serialized new energy locomotives. Some models have been prototyped, and at the same time actively supported OEMs to explore overseas markets, making gains in overseas markets such as Asia, America, Europe and Africa; the market share of mainline railway signal products remained stable, and urban rail signal systems received new orders, driving the communication signal system segment revenue to 0.416 billion yuan, yoy +131.47%. In the context of “double carbon”, intercity high-speed railways are the core project of “new infrastructure”, and the development of the intercity/city sector has ushered in a good opportunity. We believe that the urban rail industry is expected to usher in a new growth point in the new direction of smart empowerment, integration and innovation. The company can rely on its own advantages to fully tap market potential and empower the basic market of rail transit business in the long term.

Adhere to the one-core, four-strong multi-point layout, and innovate to drive breakthroughs in the new equipment business. 2024H1, the company's emerging equipment business achieved revenue of 4.094 billion yuan, yoy +9.21%, of which power semiconductor devices became the core growth point. The company's IGBT production line in Yixing entered trial production in June 2024, and is expected to enter full mass production in 2024Q4; at the same time, production capacity of medium and low voltage devices continues to increase, power grid and rail communication high-voltage devices are continuously delivered, and IGBT7.5 generation chip technology products have been delivered in batches; on the silicon carbide business side, the product has completed the development of 4th generation groove gate chips, with an annual output of 0.025 The 6-inch million-chip silicon carbide production line has been transformed and put into use. The company is optimistic about the application of silicon carbide series products in 2025. In the NEV electric drive segment, the company's production capacity has increased steadily, and production capacity has repeatedly reached new highs in a single month, while supporting Hezhong and SAIC-GM-Wuling to achieve overseas exports of about 0.04 million units; according to NE Times, the company's passenger car power module installed volume ranked in the top two in the industry, with a market share of 13.4%. At the same time, NEV electronic control installed capacity increased 57% year on year, ranking among the top six in the domestic industry. 2024H1 In the industrial converter sector, the company's industrial conversion products continue to receive new orders and simultaneous batch delivery of products in various fields. Most of the products such as photovoltaic inverters have also been shortlisted in the annual collection/framing of central enterprise power generation groups. According to Solbi Photovoltaic Network, 2024H1's photovoltaic inverters won the bid for 8.35 GW, ranking in the top five in China. Offshore equipment continues to maintain its leading position in the global market share of underwater trenching and cable laying products.

Investment advice

Maintain a “buy” rating. We adjusted the company's 2024-2026 net profit forecast to 3.75/4.374/5.285 billion yuan. The corresponding year-on-year growth rates were +20.76%/+16.61%/+20.84%, respectively, the corresponding EPS was 2.66/3.10/3.74 yuan, and the corresponding PE valuation was 17/14/12 times, respectively.

Risk warning

Investment in rail transit construction falls short of expectations, R&D progress falls short of expectations, and industry competition intensifies