A high-quality enterprise in the engine industry, continuing to be deeply involved in the fields of motorcycles, aerodynamics and machinery. The company is one of the specialized manufacturing bases for small and medium-sized power machinery products in China. It is mainly engaged in R&D, manufacturing and sales of small and medium-sized power machinery products and some terminal products, and is in a leading position in the industry in small and medium-sized power fields such as motorcycle power, general power machinery, and aviation piston power. It has now formed an industrial layout with “motorcycle engines and general machinery” as the core, covering emerging business fields such as “aerodynamics, new energy, and high-end components.”

24H1's performance grew steadily, and the cost ratio was properly controlled. The company achieved revenue of 4.81 billion yuan in 2024H1, an increase of 18.4% over the previous year, and achieved net profit of 0.28 billion yuan to mother, an increase of 8.7% over the previous year. General Dynamics machinery is generally stable. The company's 24H1 GM and terminal product sales totaled 2.2257 million units, up 25.14% year on year; achieved total operating income of 2.107 billion yuan, up 3.05% year on year; achieved net profit of 0.154 billion yuan, up 5.86% year on year; mainly 2024H1 increased market development efforts and actively opened up new profit growth points for new energy businesses such as energy storage power supplies and lithium battery garden tools. In the engine business, the company's 24H1 motorcycle engine business achieved product sales of 1.412 million units, an increase of 17.05% year on year; achieved total operating income of 2.037 billion yuan, up 26.19% year on year; achieved net profit of 0.095 billion yuan, up 28.05% year on year; mainly due to high demand in the overseas motorcycle market, the company continuously improved the technical content and added value of products and accelerated overseas market layout.

In terms of expenses, the company's expenses rate for the 24H1 period was 7.95%, down 0.79pct year on year. Among them, sales/management/finance/R&D expenses were -0.42/-0.02/+0.20/-0.47 pct year on year, respectively, and the cost control for the period was good.

The active layout of the low-altitude economy is expected to open up a second growth curve. The company actively lays out the low-altitude field through its holding subsidiary Zongshen Hangfa, mainly providing power system solutions for general aviation aircraft and unmanned aerial vehicles. In terms of products, Zong Shen Hangfa has formed a product line with small and medium-sized aviation piston engines as the main product platform, launched more than 20 derivative products and propeller products, covering the drone and light general aviation aircraft markets, and continuously optimizes and enhances integrated power system technology to achieve integrated designs such as engine+propeller+thermal management system+power generation system to meet customer needs in all aspects. On the business side, Zong Shenhangfa continues to develop application scenarios such as emergency rescue, agriculture, forestry and plant protection, etc., while accelerating the airworthiness certification process and research and development of hybrid aero engine products, laying a solid foundation for the widespread application of products in the low-altitude economy; at the same time, it continues to increase investment in specific market resources, dig deeper into market demand, and further consolidate and expand the product market share, which is expected to fully benefit the high growth of the low-altitude economy industry.

Profit forecast: The company's net profit for 2024-2026 is expected to be 6.34/7.24/0.826 billion yuan, respectively, and the corresponding PE is 23/20/17 times, respectively. First coverage, giving a “buy” rating.

Risk warning: New business development falls short of expectations, profit forecasts and valuation judgments fall short of expectations