Chuanhuan Technology released its 2024 semi-annual performance forecast, achieving significant growth. Chuanhuan Technology announced its 2024 semi-annual results forecast. In the first half of 2024, the company expects to achieve net profit attributable to shareholders of listed companies of about 92.07 million yuan to 104.35 million yuan, an increase of 50%-70% over the previous year, and net profit after deducting non-recurring profit and loss of about 88.18 million yuan to 100.34 million yuan, an increase of 45%-65% over the previous year. According to estimates, 2024Q2 is expected to achieve net profit attributable to shareholders of listed companies about 47.87 Million yuan - 60.15 million yuan, up 23%-55% year on year, up 8%-36% month on month. Net profit after deducting non-recurring profit and loss was about 46.77 million yuan - 58.93 million yuan, up 22%-53% year on year, and 13%-42% month on month. The company achieved significant performance growth in the first half of 2024. We believe that the main reasons are: (1) the company benefited from increased demand in the automotive industry, especially the NEV industry, the effective increase in supply and demand in the industry chain, and the company's NEV revenue share increased. At the same time, the company continued to optimize its product and customer structure to give full play to the business scale effect, and the sales share of the top five major customers continued to increase the company's profitability; (2) The company continued to develop a number of new energy vehicle manufacturers in the domestic NEV industry. On the basis of maintaining the company's rubber pipeline business, Vigorously promote the further application of rubber+nylon assembly piping, vehicle body accessory piping business and homemade products in OEMs, keep all components of the pipeline system self-made, and the targeted situation of the company's new product projects continues to improve; (3) The company continues to strengthen lean management and intelligent equipment transformation. On the basis of maintaining a steady growth in the overall business scale, the comprehensive cost ratio has further declined, and management efficiency and operational effectiveness have steadily improved.

New markets such as energy storage pipelines are expanding smoothly, and we are waiting for new growth businesses to explode. The company actively expands liquid cooling pipelines used in energy storage, electricity, data centers, etc., and pipeline systems in rail transit, oil and gas exploration, ships and other markets, enriching product categories, expanding product applications, and continuously cultivating new growth points for future revenue. In the first quarter of 2024, the company's expanded liquid cooling piping system products used in energy storage and data center servers saw initial results. Liquid cooling pipeline systems in the energy storage field have already begun to be supplied in batches, and liquid cooling piping systems in the data center server sector have been delivered in small batches. Currently, these products are mainly imported from abroad. Chuanhuan is taking the lead in filling domestic gaps. We judge that the pipeline market space in emerging fields such as energy storage is broad. The company has a first-mover advantage and is expected to achieve rapid growth in supply volume and open up a new growth curve for the company.

Profit forecasting and investment advice. We expect the company's net profit to be 0.237/0.299/0.36 billion yuan and EPS to be 1.09/1.38/1.66 yuan respectively. Referring to the valuation levels of companies in the same industry, considering that products in the energy storage and other fields are expected to open up a new growth curve, we will give them 16-20 times PE in 2024, corresponding to a reasonable value range of 17.44-21.80 yuan, maintaining the “superior to the market” rating.

Risk warning. The boom in the automotive industry is declining; production and sales of new energy vehicles fall short of expectations; raw material prices fluctuate greatly; and the development progress of new products and new customers falls short of expectations.