2024H1 profits are under pressure, and the second half of the year is expected to benefit from the motor replacement policy. On September 17, 2024, the company obtained a new motor inverter patent. In the first half of 2024, the company achieved a net profit of 0.393 billion yuan to mother, a decrease of 35% over the previous year. Q2 achieved net profit of 0.17 billion yuan to the mother, a year-on-year decrease of 51%. Among them, the red phase electricity account deducted 60 million yuan, and the total R&D and sales expenses in Q2 were 0.45 billion yuan, an increase of 0.11 billion yuan over the previous year. R&D expenses were mainly invested in aero motors, permanent magnet drives, bionic robots, etc., and sales expenses mainly expanded overseas sales channels. We lowered our 2024-2026 net profit forecast from 1.14, 1.33, and 1.54 billion yuan to 1.02, 1.26, and 1.42 billion yuan. The current stock price is 12.9, 10.5, and 9.3 times PE for 2024-2026, respectively. Considering the company's high barriers to high voltage motor business, strong profit stability, and obvious aeromotor business card position advantages, the second half of the year is expected to benefit from the equipment replacement cycle and maintain a “buy” rating.

Further expansion of the business is expected to benefit from the motor replacement policy in the second half of the year. In addition to traditional oil and gas, petrochemical, mining, metallurgy and other industries, the company vigorously develops the renewable energy industry, comprehensively lays out fields such as wind and hydrogen storage, and further consolidates its position in general industries such as air compressors and water pumps; in the household motor and drive sector, it continues to deeply cultivate HVAC, washing machines, refrigerators and small household appliances, and actively explore the EC sector; the electric transportation sector, the NEV industry is developing steadily, while actively penetrating into general transportation fields such as electric ships and electric aviation. With the introduction and implementation of the “large-scale equipment renewal and consumer goods trade-in” policy, market demand will be further released.

2024 is the first year of the low-altitude economy, and 2024 is expected to be the first year of the low-altitude economy under the dual catalysts of policy and industry. In 2019, the company began to lay out aeromotor products. In 2021, the company reached a strategic cooperation with COMAC and took the lead in preparing airworthiness standards for motors; in 2022, the company and COMAC jointly developed an aeronautical electric power system; in 2023, the company's 70KW high-power aeronautical electric power system was tested by experts from the Ministry of Industry and Information Technology, making it the only electric power system company selected in the “2023 Top 20 Leading Companies in China's Low-Altitude Economy”. The company has a clear first-mover advantage in the flying vehicle motor business layout, and is expected to fully enjoy the dividends of mass production of flying cars from 0-1.

Risk warning: Consumer terminal boom falls short of expectations, and the company's new customer expansion falls short of expectations.