Incident: The company released its 2024 semi-annual report. In the first half of 2024, it achieved revenue of 4.332 billion yuan, a year-on-year decrease of 0.45%; realized net profit of 0.382 billion yuan, a year-on-year decrease of 9.86%; after deducting non-return net profit of 0.344 billion yuan, a year-on-year decrease of 14.46%. Among them, 2024Q2 achieved revenue of 2.546 billion yuan, a year-on-year decrease of 8.16%; realized net profit to mother of 0.181 billion yuan, a year-on-year decrease of 27.21% and a decrease of 9.91% month-on-month.

Due to factors such as high copper prices, 24H1's gross margin declined. By business, 24H1's power cable product revenue decreased 0.25% year on year to 3.057 billion yuan, and gross margin decreased 2.78 pct year on year to 19.37% year on year; operating income of bare wire products increased 5.39% year on year to 0.586 billion yuan, gross margin increased 2.23 pct year on year to 12.79% year on year; revenue of wire and cable products used in electrical equipment decreased by 33.57% year on year to 0.188 billion yuan; operating income of communication cable and optical cable products decreased 15.29 percent year on year % to 0.078 billion yuan; the operating revenue of special cable products increased 57.94% year-on-year to 0.133 billion yuan.

It has a 500kV submarine cable production capacity and continues to invest in product development. The company has obtained a 500kV submarine cable type test report and has a 500kV submarine cable production capacity. As of July 26, 2024, there are 7 500kV production lines, which are highly competitive in the submarine cable field. In addition, the company continues to invest in product development, further consolidating its leading position in the field of high-voltage cables; 24H1 helped the State Grid successfully put into operation the first autonomous 220kV domestic insulated cable line and successfully test run the first 110kV polypropylene insulated power cable line of the State Grid. At the same time, key new product development also included autonomous domestic 500kV cross-linked polyethylene insulated power cables, autonomous domestic 500kV submarine cables, 500kV large-section smooth aluminum sheathed cables, power cable products for nuclear power plants, and high-voltage ultra-high voltage dynamic dynamic etc.

While continuously consolidating the domestic market, the company actively explores the international market. Domestically, the company has several subsidiary companies such as Qingdao headquarters, Jiaozuo, Bayi, Changsha, Beihai, etc., with a reasonable and perfect industrial layout, small transportation radius and low transportation costs; customers include State Grid Corporation, South Grid Corporation, Huadian Group, CNPC, Sinopec, etc., which continue to maintain an advantage among customers such as power grids and large central enterprises. Internationally, 24H1 won the bid for the 500kV transmission and transformation ring grid closure project in Uruguay, the San M3 Phase 3 photovoltaic project in the Philippines, the Amanmana 500MW photovoltaic project, the Egyptian wind power project, the Tana Lake hydropower project in Nepal, and the Apopo-Anyama-Azopé 225kV line construction project in Côte d'Ivoire, etc., continuing to demonstrate its international competitiveness.

Maintaining the “gain” rating: As copper prices fall from a high level in the second half of '24 and domestic sea breeze construction enters an intensive construction period, it will benefit the company's business development. We maintain our original profit forecast. We expect the company to achieve net profit of 0.839/0.912/0.981 billion yuan in 24-26, corresponding EPS of 0.25/0.27/0.30 yuan respectively, and the current stock price corresponding to 24-26 PE is 10 times 12/11/10 times, respectively. The company is one of the leading wire and cable enterprises in China, and is expected to fully benefit from the continuous increase in demand for downstream power grid investment and new energy. The company has continued to explore the ocean wind market in recent years, and the submarine cable business is expected to open up room for the company's performance growth and maintain a “gain” rating.

Risk warning: industry policy risk; raw material price fluctuation risk; industry competition increases risk.