Description of the event

On August 16, the company released its 2024 semi-annual report. During the reporting period, the company achieved operating income of 6.166 billion yuan, a year-on-year increase of 16.27%, net profit of 0.887 billion yuan, a year-on-year increase of 26.64%, after deducting non-net profit of 0.841 billion yuan, an increase of 23.48%; in the Q2 single quarter, the company achieved operating income of 3.509 billion yuan, a year-on-year increase of 12.05%, and net profit to mother of 0.524 billion yuan, a year-on-year increase of 0.524 billion yuan 8.66%, after deducting 0.5 billion yuan of non-net profit, a year-on-year increase of 0.26%. The deduction was 0.023 billion yuan more than the previous Express.

Incident comments

By product, the company's revenue for coil products in the first half of the year was 1.674 billion yuan, up 50.48% year on year. The main transformer business delivery is expected to increase. In addition, switch products increased 9.78% year on year, reactive power compensation decreased 9.10% year on year, and smart equipment category and engineering package increased 35.25% and 25.17% year on year, respectively.

By region, the company's overseas revenue in the first half of the year increased by 40.04% year on year, domestic revenue increased 10.18% year on year, and overseas revenue accounted for 24.56%. The overseas market became an important growth point for the company in the first half of the year.

In terms of gross margin, the company's gross margin reached 31.75% in the first half of the year, up 2.69 pcts year on year. Among them, single Q2 gross margin reached 32.54%, up 1.51 pcts year on year, and 1.84 pct month on month. Among them, in the first half of the year, the gross profit margin was 33.82% overseas, up 1.52 pcts year on year, and the domestic gross profit margin was 31.07%, up 2.84 pct year on year; the overall gross margin of switch products increased by 3.76 pcts, which is the main business that increased gross margin in the first half of the year.

In terms of expenses, the company's four-year rate in the first half of the year reached 14.8%, an increase of 1.74 pct over the previous year, mainly due to a 0.56 pct increase in the sales rate and a 0.84 pct increase in the financial rate. The major change in financial expenses was mainly due to an increase of 55 million yuan in exchange losses and an increase of about 10 million yuan in interest income over the same period last year; the increase in sales expenses was mainly due to increased investment in the market and sales; at the same time, the cost of equity incentives also had a certain impact.

Furthermore, the company achieved a net operating cash inflow of 0.11 billion yuan in the first half of the year, the first time since the company went public that it achieved a positive net operating cash flow for half a year. At the same time, the company's inventory reached 3.4 billion yuan, up 11.7% month-on-month, and contract liabilities reached 1.9 billion yuan, up 22.9% month-on-month, all of which reached record highs with a large month-on-month growth rate, indicating that the company's business trend is still very strong.

Overall, the company's operating quality was excellent in the first half of the year, and overseas market performance was outstanding. Considering the vast overseas market space and the company's stable domestic market, we expect the company to have net profit of 2 or 2.5 billion yuan for 24 to 25 years, corresponding to 25 or 21 times the valuation. Maintain a “buy” rating.

Risk warning

1. Domestic grid investment falls short of expectations;

2. Overseas market expansion falls short of expectations;

3. The pace of promotion of new products falls short of expectations.