Incident: The company released its 2024 quarterly report. In 24Q1, it achieved operating income of 2.9 billion yuan, -7.7% year on year; net profit to mother of 549 million yuan, +32.4% year on year; and net cash flow from operating activities of 4.587 million yuan, -99% year over year.

The 24Q1 profit growth rate slightly exceeded our expectations. The 24Q1 company achieved net profit of 549 million yuan, up 32.4% year on year and 6.6% month on month; net profit after deducting non-return to mother was 548.8 million yuan, up 54.4% year on year and 36.9% month on month. The main reasons are: 1) the increase in investment income from the major joint venture Zoomlion Electronics and Weifu Environmental Protection, an important subsidiary; 2) the Canadian company's own profits have increased. Among them, 24Q1's investment income in joint ventures and joint ventures reached 382 million yuan, an increase of 18% over the previous year.

The 24Q1 company's revenue declined slightly year-on-year, mainly due to fluctuations in post-processing business. The company achieved revenue of 2.9 billion yuan in 24Q1, -7.7% year-on-year and +5.5% month-on-month. The main reasons are: 1) the price of precious metal raw materials used in post-processing system products decreased year-on-year; 2) market competition is fierce, OEMs optimize precious metal solutions, and the amount of precious metals used is reduced, leading to a decrease in unit sales prices.

24Q1 gross profit margin, net profit margin, and expense ratio indicators continued to improve. The company's gross margin was 18.5%, +4.2pct year on year, -2.9 pct month on month; net margin was 19.8%, +6.3pct year on year, +2.2 pct month on month. In terms of cost rates, sales/management/R&D/finance expenses were 2.0%/5.9%/5.0%/0.2%, respectively, -0.2pct/+0.3pct/-1.8pct/+0.3pct. The total cost rate for the period was 13.1%, and -1.4pct month-on-month.

Maintain an “overweight” investment rating. We have long been optimistic about the company's development strategy of “energy saving and emission reduction+smart electric+green hydrogen energy+other auto parts”, and believe that the company has investment value with undervalued and high dividends. The net profit due to mother in 2024 is estimated to be 2.17 billion yuan, and the current market value corresponds to PE of 8.3x, maintaining the “increase in holdings” investment rating.

Risk warning: The release of new business fell short of expectations, and price fluctuations of precious metal raw materials exceeded expectations.