Incident: In the first half of the year, the company jointly released its 2024 mid-year report. In the first half of the year, the company achieved operating income of 0.57 billion yuan, and achieved net profit of 0.14 billion yuan, +71.75% year over year; in a single Q2, the company achieved operating income of 0.33 billion yuan, +24.09% year over year, and achieved net profit of 0.082 billion yuan, compared with the same period last year. The company achieved profit close to the previously forecast limit and performed excellently.

The diversified layout contributed to strong growth momentum, and alpha attributes were gradually realized. In the first half of 2024, the company's high revenue growth mainly benefited from the diversified layout of overseas markets and emerging products:

① Diversified market: In the first half of the year, the company achieved revenue of 0.262, 0.308 billion yuan, +10.55%, +51.28%, and the international business contributed to the core growth driver, accounting for more than half of overseas revenue, reaching 54.1%, +7.86pct year on year; Mid-America contributed 0.208 billion yuan to revenue, +41.08% year over year, showing the results of the company's overseas marketing network layout; ② Diversified products: In the first half of the year, the company's high-altitude safety lifting equipment revenue was 0.407 billion yuan , +2% year-on-year; accounting for 72%; revenue from high-altitude safety protection equipment was 0.14 billion yuan, -2% year-on-year, accounting for 25%; revenue from aerial safety work services was 0.019 billion yuan, a slight increase over the previous year, accounting for 3%.

In addition to the main traditional wind power business, the company is actively expanding new fields such as warehousing, rescue, and construction. Its products include industrial elevators, high-altitude emergency equipment, ladder guide conveyors, and ladder trucks. In the first half of 2024, the company's revenue from the non-wind power sector was about 20 million yuan, an increase of nearly 300% over the previous year. Diversified expansion brought the company more room for growth.

Order growth is good, and there is strong certainty: According to the company's investor exchanges, the company's new orders increased by nearly 50% year on year from January to May 2024; shipments increased slightly year over year, mainly affected by the late start of wind farm construction in the first quarter. As construction starts pick up, delivery is also expected to return to elasticity.

“Structural optimization+fine management” went hand in hand, and profitability improved markedly. In the first half of 2024, the company achieved gross profit margin and net profit margin of 48.64%, 24.63%, +2.15pct, +6.09pct; the total cost ratio for the period was 23.34%, -5.17pct, with sales/management/R&D/finance expenses ratios of 10.71%, 8.82%, 6.44%, and -2.63%, -4.61pct, -0.04pct, +3.62pct. The improvement in gross margin is mainly due to improving cost control and optimizing the product regional structure; at the same time, the company continues to implement fine management. Apart from financial expenses being affected by exchange gains and losses, overall expenses are developing positively, driving a significant increase in the company's profitability.

Domestic tenders have increased significantly, overseas policy support has accelerated, and domestic and foreign demand is expected to resonate.

Domestic market: According to the National Energy Administration, in the first half of 2024, China added 25.84 GW of grid-connected wind power, +12.4%; among them, land wind 25.01 GW, +14.25% year over year, sea wind 0.83 GW, -24.55% year over year; affected by delays in project commencement, the installed capacity of the domestic market grew relatively flat in the first half of the year. Looking forward to the future, according to Goldwind Technology, in the first half of 2024, China's wind power equipment public bidding market added 66.1 GW of tenders, +48% over the same period last year. The number of tenders increased significantly. It is expected that the demand boom in the wind power equipment industry will rise marginally in the future.

Overseas markets: At the macro level, according to the European Wind Energy Association and the US Department of Energy, in the first half of 2024, Europe and North America introduced a number of policy plans to support the establishment of a rapid and long-term growth trend in wind power generation. At the micro level, take Vestas, the leading overseas machine manufacturer, as an example. The volume of new orders in 2023 and the first half of 2024 was 18.38 and 5.9 GW respectively, +64.32% and +4.72% compared with the same period last year. The overall overseas wind power installation boom showed a recovery trend, which is beneficial to the wind power industry chain going overseas.

Investment advice: We expect the company's revenue for 2024-2026 to be 1.5, 1.82, and 2.17 billion yuan, respectively, with growth rates of 35.9%, 21.2%, 19.2%, and net profit of 0.3, 0.4, and 0.51 billion yuan respectively, with growth rates of 45.9%, 31.7%, and 28.2% respectively. There is a three-dimensional diversified expansion of Sino-international products, markets, and fields, with outstanding growth, cost reduction and efficiency to gradually improve profit levels. The 6-month target price is 28.4 yuan. The 6-month target price is 28.4 yuan, which is equivalent to a dynamic price-earnings ratio of 20X in 2024.

Risk warning: New downstream installations fall short of expectations, downstream acceptance falls short of expectations, affects the pace of confirmation of acceptance, promotion of new products falls short of expectations, and overseas market expansion falls short of expectations.