Jingu Financial News | Guoyuan International pointed out that Harbin Electric (01133) achieved revenue of 17.04 billion yuan in the first half of 2024, up by 25.6% year-on-year. The new electrical utilities business reached 9.61 billion yuan, an increase of 43.4%. Among them, coal-fired power / hydroelectric / nuclear power equipment achieved 5.87/1.36/1.52 billion yuan respectively, with growth rates of +44.8% / +15.4% / +18.7% respectively. In terms of orders, the overall contract signing amount decreased by 20.1%, with new orders for new electrical utilities reaching 26.03 billion yuan, an increase of 2.84%. Among them, coal-fired power / hydroelectric / nuclear power achieved 10.83/4.47/3.06 billion yuan respectively, with changes of -6.9% / +16.7% / +20.0%.

The bank pointed out that the company's ample backlog of orders ensures the growth of energy equipment business, and the quality of orders is expected to increase gross margin. The bank believes that the company's future revenue from energy equipment business is expected to grow, with further room for improvement in gross margin levels, and with a certain degree of sustainability. Hydropower equipment, coal-fired power flexibility transformation, and other businesses provide new driving forces. It is expected that future market new orders will maintain a quantitative trend. At the same time, pumped storage hydropower develops rapidly, and coal-fired power flexibility transformation is one of the future directions of the coal-fired power market, with the expectation that these businesses will be the company's new driving forces for future development.

The bank further pointed out that the company's overall operational efficiency and financial health improvement help to increase profit levels. The company's cost levels have continued to improve in recent years. During the period, the company's sales, management, research and development, and financial cost rate was 8.6%, down by 1.2 percentage points year-on-year. The asset-liability level has also improved, with an asset-liability ratio of 79.6%, down by 2.8 percentage points year-on-year.

The bank stated that as a major energy equipment supplier in the country, the company will continue to benefit from the development of the energy equipment market. Maintaining previous forecasts, the net income attributable to the parent company for 2024-2026 is expected to be 0.95, 1.39, 1.68 billion yuan respectively, with a three-year compound annual growth rate of 42.5%. The company is given a target valuation of 7.0 times PE (2024E), corresponding to 0.5 times PB (TTM). The bank maintains a target price of 3.20 Hong Kong dollars, with an expected increase of 35% compared to the current price, and reiterates a "buy" rating.