Description of the event

The company achieved operating income of 54.627 billion yuan in the first half of 2024, up 0.10% year on year; attributable net profit of 0.955 billion yuan, up 6.88% year on year; net profit after deduction of 1.033 billion yuan, up 20.59% year on year. Looking at the second quarter of a year, we achieved operating income of 25.592 billion yuan, down 0.21% year on year; attributable net profit of 0.398 billion yuan, up 3.3% year on year; and net profit without deduction of 0.494 billion yuan, up 38.26% year on year.

Incident comments

Nuclear construction and housing construction went up and down, and the company's revenue was basically flat. In the first half of 2024, revenue was 54.627 billion yuan, up 0.10% year on year. By segment, nuclear construction achieved operating income of 15.083 billion yuan, an increase of 30.22% year on year, while housing construction achieved revenue of 35.701 billion yuan, down 5.71% year on year.

Overall costs remained flat during the period. The company's comprehensive gross profit margin for the first half of 2024 was 9.83%, up 0.19pct year on year. In terms of cost ratio, the company's expense ratio for the first half of 2024 was 6.20%, up 0.02pct year on year. Among them, sales, management, R&D and financial expenses changed year-on-year to -0.01, -0.26, 0.45, -0.15pct to 0.03%, 1.99%, 2.09%, and 2.09%, respectively. The cost ratio for the single second quarter was 6.60%, up 0.07pct year on year, including sales, management, R&D and financial expenses. The rates changed year-on-year by -0.03, -0.50, 0.44, and 0.16pct to 0.03%, 1.78%, 2.75%, and 2.05%, respectively.

Taken together, the company's net interest rate for the first half of 2024 was 1.75%, up 0.11pct year on year, 1.89% after deduction, and 0.32pct.

Operating cash flow improved, and the cash to cash ratio declined. The company's net cash flow from operating activities in the first half of 2024 was 12.901 billion yuan, a year-on-year decrease of 0.186 billion yuan, a year-on-year increase of 66.53%, an increase of 3.59 pct; the net current ratio was 63.39%, down 6.11 pct; at the same time, the company's balance ratio increased 0.28 pct to 82.90% year on year, and the number of accounts receivable turnover increased by 12.05 to 143.90 days year on year.

Nuclear construction has entered a boom zone, and the bottom of housing construction impairment is now: On August 19, 2024, the National Assembly approved 11 units, with a total investment of over 200 billion yuan. This approval will bring nearly 40 billion to the nuclear power construction market, and China's nuclear construction will benefit deeply. Considering that the nuclear power construction cycle is about 5 years, the gradual upward number of approved units will establish the foundation for the company's strong performance growth in 2024-2027. On the other hand, thanks to previous adequate calculations, the company's credit impairment in the first half of the year was only 0.24 billion, a year-on-year decrease of 0.13 billion, which may indicate that the company's current asset quality has bottomed out. Considering the long-term prosperity of nuclear power in the future, we believe that high-quality nuclear construction business with high gross profit and low impairment will strongly drive the company's high performance growth. The company is expected to achieve performance of 2.423 and 2.837 billion yuan in 2024 and 2025, corresponding to the current closing price PE of 8.5 and 7.2 times, respectively, maintaining a “buy” rating.

Risk warning

1. The number of approved nuclear power units falls short of expectations; 2. Nuclear power going overseas falls short of expectations; 3. Safety risks of nuclear power projects; 4. Risk of credit impairment.