Key points of investment

Incident: The company released its 2024 semi-annual report. 2024H1 achieved operating income of 0.514 billion yuan, +45.81% year over year; net profit to mother 0.024 billion yuan, +85.99% year over year. Among them, in 24Q2, the company achieved operating income of 0.366 billion yuan, +32.63% year-on-year; net profit to mother was 0.018 billion yuan, or +49.27% year-on-year.

Revenue and profit grew steadily, and the waste heat recovery business performed well. 2024H1 achieved operating income of 0.514 billion yuan, or +45.81% year on year; net profit to mother was 0.024 billion yuan, +85.99% year over year. Among them, sales revenue from main businesses such as dry slag removal systems and deep recovery systems from low temperature flue gas waste heat increased steadily. In 24H1, the company's low-temperature flue gas waste heat deep recovery system business revenue was 0.216 billion, +157.86% year over year, and dry slag removal system business revenue was 0.14 billion, +30.64% year over year.

Focus on R&D investment to promote hydrogen energy business. 2024H1 invested 23.791 million yuan in R&D, an increase of 10.29% over the previous year, adding 9 invention patent applications, 14 utility model patent applications, and 12 software copyright applications. In the first half of 2024, the company obtained 15 authorized invention patents, 7 authorized utility model patents, 12 authorized software works, and 34 authorized trademarks. In terms of new business, the company uses financial leasing to invest in the construction of a 120MW fishery and light complementary project to actively promote the company's technology research and manufacturing in the field of hydrogen energy equipment, which is expected to further optimize the company's industrial strategic layout.

The flexibility transformation of coal and electricity may be accelerated, and the company is expected to benefit deeply. In February 2024, the National Development and Reform Commission and the National Energy Administration issued the “Guiding Opinions on Strengthening Capacity Building for Peak Shifting and Energy Storage in Power Grids”, which proposes to strengthen peak shifting capacity, focus on improving peak shifting capacity for supporting power sources, achieve “thorough correction” by 2027, and explore deep peak shifting of coal power units on the premise of ensuring safety in regions where new energy is relatively high and peak shifting capacity is insufficient. The minimum power generation output reaches 30% below the rated load; comprehensively promote demand-side resource participation in power system peak shifting; fully tap demand-side regulation potential. In May, the State Council issued the “2024-2025 Energy Conservation and Carbon Reduction Action Plan” to strengthen the clean and efficient use of coal, promote low-carbon transformation and construction of coal power, and promote the “three-reform linkage” of energy saving and carbon reduction transformation, flexibility transformation, and heating transformation. We believe that the flexibility transformation of coal and electricity may be accelerated, and the company is expected to benefit deeply.

Investment advice and valuation: The company's revenue from 2024 to 2026 is expected to be 1.294 billion yuan, 1.596 billion yuan, and 1.91 billion yuan, respectively, with growth rates of 25.7%, 23.4%, and 19.6% respectively, and net profit to mother of 0.127 billion yuan, 0.15 billion yuan, and 0.186 billion yuan, respectively, with growth rates of 47.0%, 17.7%, and 23.9%, respectively.

Risk warning: Policy development falls short of expectations; risk of fluctuations in raw material prices; risk of market competition; high customer concentration.