2024H1 revenue/net profit attributable to mother +8%/-49% YoY, stock incentive fees affect 24H1 profit

Pangu Intelligence released its 2024 mid-year report: 2024H1's revenue/net profit attributable to mothers/net profit net profit excluding non-return to mother was 200.19/29.5/22.05 million yuan, +7.64%/-49.04%/-60.56% year-on-year. Corresponding to 2024Q2 revenue/net profit attributable to mothers/net profit net income not attributable to mother was 118.17/16.28/10.18 million yuan, +20.31%/-43.53%/-63.66% YoY, +44.07%/+23.05%/-14.30% month-on-month.

The gross margin of the lubrication system business declined in the first half of 2024, and hydraulic system revenue increased dramatically

In the first half of 2024, the total revenue of the company's main lubrication system business was 0.135 billion yuan, down 15.42% year on year, accounting for 67.60% of the company's revenue, and the average gross margin of lubrication systems was about 44.72%, -5.36pct; the operating income of the hydraulic system and accessories business was 49.09 million yuan, up 95.85% year on year, accounting for 24.52% of the company's revenue. The average gross margin for hydraulic systems was about 23.45%, or -9.54pct year on year.

Stock payments affected net profit attributable to mother, and profit in the first half of the year was under pressure

The company paid a share payment fee of 21.1248 million yuan under the 2023 Restricted Stock Incentive Plan. As a result, 24H1's net profit attributable to shareholders of listed companies fell to 29.504 million yuan, a year-on-year decrease of 49.04%; after excluding this factor, net profit to mother was 50.6288 million yuan. Currently, due to pressure from wind power manufacturers to reduce costs, the sales price of the company's lubrication systems has been lowered, and operating income and net profit have declined accordingly. At the same time, although hydraulic systems are in the early stages of business development, and the increase in sales volume led to an increase in overall revenue, their gross margin was significantly lower than that of lubrication systems, and the net profit brought about by the increase did not offset the negative impact of falling lubrication system prices, which ultimately led to a year-on-year decline in the company's overall net profit.

Investment advice

The company fully relies on the core technology and experience accumulated in the field of wind power lubrication systems to actively promote the application of products in other business fields. Revenue has been achieved in non-wind power fields such as construction machinery, rail transit shield machines, and hoisting machinery. The products have shown results in new application fields in 2023, and may continue to drive the company's performance growth in the future. The test progress of the self-developed hydraulic propeller system is progressing steadily. It is expected to be tested by the end of 2024 and mass-produced in 2025. The product has advanced technology and high reliability, and can replace imported hydraulic components with domestic production. Considering the impact of stock incentive fees on annual profit, we lowered our full-year performance forecast. We expect the company to achieve revenue of 0.518/0.722/1.001 billion yuan in 2024-2026 (previous value was 0.53/0.736/1.015 billion yuan), net profit due to mother was 0.091/0.151/0.229 billion yuan (previous value was 0.113/0.167/0.246 billion yuan), and corresponding PE was 32/19/ 13 times, downgraded to “gain” rating.

Risk warning

Hydraulic system market uncertainty; overseas market uncertainty; increased R&D and production costs, etc.