Core views

In the first half of 2024, the company achieved revenue of 11.345 billion yuan, +9% year-on-year, and net profit to mother -0.13 billion yuan, or -141% year-on-year. Among them, smart cable network revenue was 10.287 billion yuan, up 5.98% year on year, and net profit was 0.155 billion yuan, down 72.78% year on year. It was mainly due to the increase in the price of raw materials such as copper and aluminum and the gross profit margin affected by the company's adoption of a price strategy. Additionally, due to Huayun Data's management, etc., the company calculated a fair value loss of 50 million yuan. Looking at the current high point, copper prices have begun to fluctuate and fall. The marginal impact is already small. It is expected that gross margin will return to the original level in the second half of the year. The smart battery business is constrained by intense price competition in the industry. Profits are still under pressure, but there is already a marginal trend of loss reduction. Revenue from the smart airport business grew steadily, and contract orders increased year-on-year.

occurrences

The company released its 2024 semi-annual report.

In the first half of 2024, the company achieved revenue of 11.345 billion yuan, +9% year-on-year, net profit to mother -0.13 billion yuan, -141% year-on-year, and -0.135 billion yuan after deduction, -147% year-on-year.

Among them, the 2024Q2 company achieved revenue of 6.534 billion yuan, +8% YoY, +36% month-on-month, net profit to mother -0.155 billion yuan, -178% YoY, -722% month-on-month, and -0.14 billion yuan after deduction, -178% YoY and -2524%.

Brief review

Smart cable network business: Revenue is growing steadily, and the net interest rate of raw material price reduction is under pressure.

In the first half of 2024, the company's smart cable network achieved operating income of 10.287 billion yuan, a year-on-year increase of 5.98%, and net profit of 0.155 billion yuan, a year-on-year decrease of 72.78%. The main reasons for the year-on-year decline in net interest rates are: 1) the price of raw materials such as copper and aluminum increased, which led to closed contracts being signed at a low price but delivered at a high price, affecting gross profit margin; 2) market investment fell below expectations, affecting cable demand, and the company's adoption of a price strategy affecting gross profit margin; 3) Huayun Data Holding Group Co., Ltd. lost 50 million in fair value. Currently, the book value of Huayun Data Holding Group Co., Ltd. is 0 yuan, which is a one-time accrual. Looking at the current high point, copper prices have begun to fluctuate and fall. The marginal impact is already small, and gross margin is expected to return to the original level in the second half of the year. In terms of submarine cables, the company is focusing on promoting the Nantong Submarine Cable Digital Intelligence Lighthouse Plant. It has now completed the main plant construction, equipment infrastructure, power supply and distribution system, etc.; in terms of research and development, it has completed AC 35 kV, 66 kV, 220 kV and 330 kV photoelectric composite submarine cable and soft joint technology research and development, 66 kV and 110 kV wind power torsion-resistant cables and clustered dynamic submarine cables, etc., and promoted the development of AC 500kV, DC 320kV and 500kV optical fiber composite submarine cables and soft connectors.

Smart battery business: Due to intense price competition in the industry, profits are still under pressure.

In the first half of 2024, the company's smart battery business achieved revenue of 0.491 billion yuan, a year-on-year increase of 116.30%, and net profit of 0.345 billion yuan, a year-on-year decrease of 30.14%. Due to intense price competition in the industry, profits are still under pressure.

In terms of the battery business, the energy storage sector received more than 10 million contract orders of 1.12 billion yuan, +415% compared to the same period; the small power sector signed electric motorcycle market orders and continued promotion of large cylindrical battery products. The battery business is expected to reduce year-on-year losses throughout the year.

In the copper foil business, 2024H1 shipped 0.0043 million tons of copper foil, which has basically reached the volume for the whole of last year, but the profit side was affected by: 1) processing costs continued to decline; 2) the Yibin factory had just been put into operation. After the fixed assets were converted, there was amortization pressure, and it was still in a state of loss in the first half of the year. It is expected that in the second half of the year, as shipments continue to increase month-on-month, amortization pressure will decrease marginally, and the loss margin will be less than in the first half of the year.

Smart airport business: Revenue grew steadily, and contract orders increased year-on-year.

In the first half of 2024, Beijing Hangan achieved operating income of 0.547 billion yuan, a year-on-year increase of 36.28%, and net profit of 0.036 billion yuan, a year-on-year decrease of 11.71%, corresponding to a net interest rate of 6.6%. The profit side fluctuated slightly, which is a normal category related to the gross margin of execution of some projects. As of the first half of the year, the company had received over 10 million contract orders of 1.791 billion yuan, an increase of 150% over the previous year. The smart airport business is expected to continue to grow steadily year over year in the second half of the year.

Profit forecast: The company's net profit is expected to be 0.37 and 0.67 billion yuan in 2024-2025, corresponding to 22.2 and 12.3 times PE.

Risk analysis

1) Downstream demand falls short of expectations: the sales side may be affected by weak demand and fall short of expectations; the production side may be affected by large fluctuations in upstream raw material prices, etc., which in turn affects the shipment volume and profitability of the company's related business.

2) The rise in raw material prices exceeded expectations: Prices of raw materials fluctuated greatly in stages. Price instability had a certain impact on terminal demand, and at the same time disrupted the company's short-term performance.

3) The company's key projects fall short of expectations: As a participant in the new energy circuit, the promotion of key projects is the key to supporting revenue and profit, and is also a reflection of the company's growth. Failure to advance key projects as expected will affect current and long-term performance.