Event: The company released its 2024 semi-annual report and achieved steady revenue growth.
1) 2024H1 achieved revenue of 11.344 billion yuan, +9.41% YoY; realized net profit attributable to mother -0.13 billion yuan, -140.66% YoY; realized deducted non-net profit of -0.135 billion yuan, or -147.07% YoY. Corresponding to Q2 revenue of 6.533 billion yuan, +7.83% YoY, +35.80% month-on-month; net profit to mother -0.155 billion yuan, -177.80% YoY; net profit minus 0.14 billion yuan, -177.51% YoY.
2) The cost rate remained stable: 2024H1 sales/management/R&D/finance expenses were 3.23%/2.37%/3.13%/1.57%, respectively, -0.10pct/+0.08pct/+0.22pct/-0.01pct, respectively, and the cost rate for the period was +0.19pct year-on-year. The overall cost rate remained stable.
3) The 2024H1 company's comprehensive gross margin was 9.86%, -4.00pct; of these, Q2 gross margin was 9.13%, -4.53pct yoy, and -1.73pct month-on-month. Affected by rising prices of raw materials such as copper, the company's profit level was under pressure in the short term.
Smart cable network business: The business is developing steadily, and the submarine cable factory will soon be put into operation.
2024H1's smart cable network business achieved revenue of 10.287 billion yuan, +5.98% year over year, and net profit of 0.155 billion yuan, or -72.78% year over year. Mainly due to the increase in prices of raw materials such as copper in the first half of the year, the gross profit margin and net interest rate of the smart cable network business declined. Looking ahead to the second half of the year, with the gradual decline in copper prices and the delivery of high-priced orders received in the first half of the year, the profit level of the smart cable network business is expected to gradually recover.
The company's Nantong Submarine Cable Digital Intelligence Lighthouse Plant has now completed the main plant construction, equipment foundation, power supply and distribution system, etc., and is proceeding with equipment installation and commissioning. In terms of submarine cable research and development, we have completed research and development of AC 35 kV, 66 kV, 220 kV and 330 kV photoelectric composite submarine cable systems and soft joint technology, 66 kV and 110 kV wind power torsion-resistant cables and cluster dynamic submarine cables, etc., and promoted the development of AC 500 kV, DC 320 kV and 500 kV optical fiber composite submarine cables and soft joints, making every effort to promote the design and construction of 0.015 million ton intelligent ships. In the future, with the commissioning of the submarine cable factory, the company's smart cable network business will usher in a new growth point, and it is expected that it will continue to achieve high-quality development.
Lithium battery business: Short-term performance is under pressure, and orders are growing rapidly.
2024H1, the company's smart battery business achieved revenue of 0.491 billion yuan, +116.30% year-on-year, and net profit of 0.345 billion yuan, or -30.14% year-on-year. Due to the current low utilization rate of the company's lithium battery production capacity and the commissioning of a new copper foil factory, depreciation and amortization pressure is high. Furthermore, copper foil processing costs have now declined, and multiple factors have caused the company's lithium battery business to lose money.
2024H1's smart battery business received over 10 million contract orders of 1.12 billion yuan, an increase of 414.96% over the previous year, and its energy storage products and services continued to be recognized by domestic and foreign markets. Looking forward to the future, the profit level of the company's smart battery business is expected to be greatly improved as orders are gradually released, capacity utilization increases, and the copper foil product structure is upgraded to 4.5 μm/5 μm/6 μm medium strength/high resistance/high elongation.
Smart airport business: high-quality assets, contributing to stable performance.
2024H1 Beijing Airlines achieved revenue of 0.547 billion yuan, +36.28% year over year, and net profit of 0.036 billion yuan, or -11.71% year over year. In the first half of the year, it received over 10 million contract orders of 1.791 billion yuan, +150.00% over the same period last year.
As a high-quality asset of the company, Beijing Hangan is expected to continue to contribute to stable performance.
Investment advice: Due to short-term pressure on the company's lithium battery business, we lowered our previous profit forecast. We expect that in 2024-2026, the company's revenue will be 27.46 billion yuan, 30.782 billion yuan, and 34.407 billion yuan (previous value: 28.589 billion yuan, 32.473 billion yuan, 34.853 billion yuan), with year-on-year growth rates of +12.24%, +12.09%, and +11.78% respectively; net profit to mother is 0.451, respectively billion yuan, 0.721 billion yuan, and 0.837 billion yuan (previous value: 0.821 billion yuan, 0.971 billion yuan, 1.128 billion yuan), year-on-year growth rates were +41.09%, +59.89%, and +16.06%, respectively; EPS was 0.20/0.32/0.38 yuan, respectively, and PE corresponding to the current stock price was 19/12/10 times, respectively, maintaining a “buy” rating.
Risk warning: Grid investment falls short of expectations, new energy installations fall short of expectations, increased industry competition, sharp fluctuations in raw material prices, etc.