The company's heat pump controller may be restored, and the data center fan inverter controller will open up incremental space for commercial air conditioners. The company's main products are inverter drives and system controllers. Heat pumps and commercial air conditioning are the company's basic business areas, accounting for about 80% of total revenue in 2020-2022. Judging from the feedback from HVAC's 2024 mid-year report, European heat pumps may have come to an end, and the data center HVAC business has entered a boom cycle under the AI trend. The company has established stable cooperative relationships with well-known manufacturers at home and abroad, and is expected to fully benefit from the positive downstream trend. We maintain the original profit forecast. We expect the company's revenue for 2024-2026 to be 1.781, 2.549, and 3.585 billion yuan, respectively, with net profit of 0.234, 0.373, and 0.564 billion yuan, EPS of 2.48, 3.96, and 5.98 yuan/share. The PE corresponding to the current stock price is 20.4, 12.7, and 8.4 times, respectively, maintaining a “buy” rating.

European heat pumps go to storage or come to an end

Due to the high base in the previous period, HVAC's 2024 mid-year report basically reported a decline in demand in the European heat pump market, but as the downstream storage trend improves, it is basically expected that the European heat pump market will continue to recover in the second half of 2024.

1. Carrier (Carrier): Expected to see a typical seasonal recovery in 2024H2 and recovery of Q4 heat pumps; 2. Ariston (Ariston): 2024H1 European heat pump demand is weak, and 2024H2 is expected to continue to rebound; 3. NIBE: With the exception of Germany, the vast majority of markets are nearing the end of storage; 4. Finney (domestic): 2024H1 pool heating products have shown signs of recovery.

Under the AI trend, the data center HVAC business has entered a boom cycle. Commercial inverter air conditioners are widely used in various usage scenarios such as office buildings, libraries, subway stations, shopping malls, hotels, and data centers. Data center HVAC is growing strongly under the AI trend.

1. Carrier (Carrier): 2024H1 data center orders surpassed 2023 and are expected to grow strongly in 2025; 2. Trane (Trane): Ongoing orders in data centers and other segments continue to grow; 3. Regal (Regal): The power system business is largely driven by the data center market; 4. Carel (Carel): The 2024H1 North American market grew 12.4% year-on-year, mainly driven by data centers.

Risk warning: Industry competition intensifies, downstream demand falls short of expectations, and business and customer development falls short of expectations.