performance

The company announced 2024H1 results, achieving revenue of 0.537 billion yuan, YoY +19.4%; achieving net profit attributable to mother of 0.104 billion yuan, YoY -5.4%; and net profit without deduction of 0.074 billion yuan, YoY -23.0%. Among them, 2024Q2 achieved revenue of 0.396 billion yuan, YoY +49.6%; realized net profit attributable to mother 0.081 billion yuan, YoY +15.5%; realized net profit of 0.067 billion yuan and YoY +8.5%.

Gross margin is affected by product delivery and is expected to pick up quarterly in the future

① System integration revenue was 0.432 billion yuan, up 25.4%; gross profit margin was 28.35%, down 9.4pct year on year. ② Electricity design revenue was 0.041 billion yuan, an increase of 108.1%; gross profit margin was 70.6%, an increase of 2.2 pct. ③ Construction and operation and maintenance revenue was 0.061 billion yuan, down 25.6%; gross profit margin was 31.2%, down 11.9% year on year. Since most of the confirmed revenue projects in the first half of the year were network-integrated products from Anhui and other regions, high-margin communication integration products actually received less, which dragged down the company's gross margin level. In terms of proportion, the construction and operation and maintenance business is mainly carried out in integrated projects in Jiangsu. The share of Jiangsu projects in revenue has declined, which is also dragging down the gross profit margin of this part of the business. In the future, gross margin is expected to rise quarterly as the share of communication integration projects increases and delivery projects in Jiangsu are confirmed.

Demand for grid informatization is increasing, and the growth rate is expected to continue to rise

At this stage, power grids need to increase investment in distribution network informatization for more accurate prediction/control. Currently, informatization construction shows a situation where the scale of investment is potentially increasing and products are being continuously expanded. Although the upper limit of overall power grid investment growth rate is limited, the penetration rate of power grid information technology products is expected to increase, driving sector investment growth. As early delivery projects are confirmed, the share of superimposed communication products will increase, and the growth rate and gross margin are expected to continue to rise.

Investment advice

We expect net profit to be 0.333/0.424/0.56 billion yuan on 24/25/26, respectively, corresponding to PE 15/12/9 times, respectively, maintaining a “buy” rating.

Risk warning

Market competition increases risk; risk of concentration of upstream suppliers; risk of concentration of downstream customers.