The company announced that in the first half of the year, revenue was 4.672, 0.431, and 0.391 billion yuan of non-net profit, up -5.44%, 0.80%, and 32.66% year-on-year. Among them, Q2 revenue for the single quarter, net profit, and non-net profit of 2.394, 0.232, and 0.219 billion yuan, increased by -5.09%, -4.37%, and 61.09% year-on-year.

The share of electricity in the environmental protection business has increased, and the quality of operations has been continuously optimized. In the first half of the year, the company's revenue and profit mainly came from the environmental protection business, achieving revenue of 4.672 billion yuan, and the overall gross margin remained stable. A new environmental protection project contract of 5.527 billion yuan was signed during the reporting period, of which the power industry accounted for 56.79%, mainly benefiting from the construction and upgrading of low-emission coal-fired power projects. Non-electric industries such as steel and cement accounted for 43.21%, a slight decline. The total number of orders in hand at the end of the period was 19.54 billion yuan, supporting the steady development of the company's main business. The company's expense ratio decreased by 1.3 pcts to 13.7% year on year, and the net interest rate increased by 0.6 pct to 9.2%. Considering the impact of non-recurring profit and loss caused by Huatai Insurance's impairment in the same period last year, the actual company's profit performance continued to increase. At the same time, the company strengthened order quality control, and the net cash inflow from operating activities was 0.532 billion, a significant improvement over the same period last year. At the end of the period, the company's debt ratio was 67.61%, and the cash balance was 1.963 billion yuan. Fixed assets and ongoing construction projects increased to 3.03 billion and 3.46 billion respectively.

The green power project is put into operation, and its contribution will continue to increase. In the past year, the company signed a number of wind and green power projects. At the end of March this year, the first phase of Zijinlong Jinglaguo Salt Lake's “Source Network Cargo Storage” phase 1 was put into operation for power generation, and the 300MW photovoltaic unit in Wucha was officially connected to the grid in late July. The company has formed a win-win business model around Zijin's global mining resources. Zijin's global industrial distribution facilitates the acquisition of wind and photovoltaic plant resource indicators. Its land resources are more generous. Compared with other industrial and commercial scenarios, the single project capacity is larger. Meanwhile, mine green electricity mainly supports Zijin Mining, which has a high self-use ratio and high electricity prices, leading to better IRR. At present, the company still has several domestic and foreign mining landscape green power projects, and the green power business will gradually contribute.

The energy storage business continues to advance, expanding new space in line with Zijin Green's transformation. The production capacity of energy storage cell production lines gradually climbed, and performance quality was continuously optimized. PACK and system integration businesses simultaneously expanded domestic and foreign markets, and energy storage orders amounted to 1.499 billion yuan at the end of the period. Furthermore, the company has seized the opportunity of “oil to electricity” in Zijin Mining to carry out the construction and operation of mining cards, storage and exchange power stations, etc., to form more diversified mine energy service capabilities and broaden development space.

Zijin, the majority shareholder, continues to increase its holdings. Since 2023, the majority shareholders have continued to increase their holdings of the company through centralized bidding. By the end of July, the total shareholding ratio of the majority shareholders and their wholly-owned subsidiaries had increased to 23.7%, which will continue to further empower the company in various aspects such as management, resources, and markets.

Investment advice: Consider industry changes in the direction of environmental protection and new energy, forecast the company's net profit of 1.06 billion in 2024, and maintain the “Highly Recommended” rating.

Risk warning: The progress of new energy projects falls short of expectations, fluctuating raw material prices, and traditional businesses fall short of expectations.