Description of the event

Altway released its 2024 semi-annual report. 2024H1 achieved revenue of 4.418 billion yuan, a year-on-year increase of 75.48%; of these, 2024Q2 achieved revenue of 2.453 billion yuan, a year-on-year increase of 47.19%; among them, achieved revenue of 2.453 billion yuan, a year-on-year increase of 65.94%, and a month-on-month increase of 24.89%; net profit to mother of 0.436 billion yuan, a year-on-year increase of 31.08%. Revenue and profit for the first half of the year were at the upper end of the performance forecast range.

Incident comments

The company's revenue grew rapidly in the first half of the year, thanks to the continuous acceptance of on-hand orders. Judging from the pace of delivery throughout the year, the first half of the year was in line with expectations. In terms of profit, gross margin in the first half of the year was about 33.8%, down 2.8 pct year on year. Mainly, operating costs increased due to the transfer of warranty funds from sales expenses to operating costs, which corresponded to a 7.0% year-on-year decrease in sales expenses. The estimated impact of warranty costs on gross margin is about 1 pct, and the rest is the impact on delivery of monocrystalline furnaces and screen printing lines. The net profit margin for the first half of the year was 17.4%, down 3.3 pct year on year, falling within the expected range of 16%-20%.

In terms of orders, H1 new orders were 6.285 billion yuan (tax included), up 8.7% year on year, and current orders were 14.341 billion yuan (tax included), up 41.1% year on year; Q2 new orders were 2.84 billion yuan (tax included), down 10.1% year on year, mainly affected by increased losses and lower capital expenditure by photovoltaic companies. The company successfully obtained a large purchase order for 10+GW ultra-high speed 0BB string welding equipment from a leading company, verified the technical and economic advantages of the 0BB process, and supported order growth in the second half of the year.

In other financial indicators, the top five H1 customers accounted for 46.37% of sales, an increase of 14.22pct over the previous year. Customers were further concentrated and the risk of repayment was reduced. H1 net operating cash flow - 0.01 billion yuan. The year-on-year decline was mainly due to an increase in the company's procurement payments and salary payments; among them, Q2 net operating cash flow was 0.194 billion yuan, which changed from negative to positive over the previous month. H1 ended inventory of 7.34 billion yuan, and goods sold at 6.15 billion yuan, accounting for 83.7%.

The company continues to promote a platform-based strategy, and various product lines have borne fruit. In terms of photovoltaics, string welding machines account for more than 60% of the market. The leading position is stable, 0BB orders have achieved major breakthroughs, and an intellectual property protection network has been established. In terms of energy storage, we have received orders from CRRC Zhuzhou, Haibo Sichuang, and Haishida (US). In terms of semiconductors, orders for aluminum wire bonding machines and AOI testing equipment have increased significantly, and customer repurchase rates have continued to rise; semiconductor packaging equipment has received orders from IGBT and AOI customers such as Wuxi Xinjie Energy, Fuman Microelectronics, and Qipai Technology, and has established good cooperative relationships.

The estimated net profit for 2024 is 18.7 yuan, corresponding to about 6 times PE, maintaining the “buy” rating.

Risk warning

1. The downstream demand for string welding machines falls short of expectations;

2. The development of platform-based businesses such as monocrystalline furnaces, battery equipment, and semiconductor equipment fell short of expectations.