Incident: The company released its semi-annual report. The first half of 2024 achieved revenue of 1.152 billion yuan, a year-on-year decrease of 8.55%, and net profit to mother of 0.128 billion yuan, a year-on-year decrease of 19.47%.

Due to subsidies for photovoltaic power plants, performance is under pressure in the short term. Looking at a single quarter, 24Q2 achieved revenue of 0.687 billion yuan, a year-on-year decrease of 16.18%, and net profit to mother of 0.082 billion yuan, a year-on-year decrease of 32.86%.

Revenue and profit fluctuated greatly in the second quarter, mainly due to: 1) The company's photovoltaic power plants were affected by the reduction in subsidies, which reduced the revenue for 2019-2024 in one go. 2) Revenue recognition for the second quarter was affected due to the long production and delivery cycle of nuclear power equipment, as well as export waste heat boilers, pressure vessels, etc.

The production cycle of large-scale non-standard equipment is long, and it is normal for quarterly revenue confirmation to fluctuate, and the reduction in revenue from photovoltaic power plants is a short-term impact. It is expected that this impact will be eliminated in 24H2 and 2025.

Main and amateur heat boilers have grown steadily, contract liabilities have increased significantly, and the company has abundant cash flow. By business, 2024H1's waste heat boilers achieved revenue of 0.67 billion yuan, an increase of 18% over the previous year, and the company's main business, waste heat boilers, still achieved steady growth. Pressure vessels and nuclear power products achieved revenue of 0.33 billion yuan and 0.008 billion yuan respectively, which declined due to extended production and revenue recognition cycles. Environmental protection engineering and sewage treatment achieved revenue of 0.052 and 0.012 billion yuan respectively, with year-on-year increases of 12% and 125%. Furthermore, as of the first half of 2024, the company's contract debt was approximately $1.62 billion, an increase of 16.8% over the same period in 2023, a record high. Furthermore, the company's cash flow is relatively abundant. As of the first half of 2024, the company's monetary capital was about 1.32 billion yuan, which continued to grow from the end of the previous period.

The company is confident in issuing a buyback plan. On July 15, 2024, the company issued a repurchase report. It plans to use its own capital of RMB 50 million-100 million yuan to repurchase RMB common shares (A shares) issued by some companies through centralized bidding transactions. The maximum repurchase price is 8.55 yuan/share (inclusive), accounting for approximately 0.69% to 1.39% of the company's total share capital of 842,271,055 shares. The repurchase period is 12 months from the date the shareholders' meeting deliberates and approves the share repurchase plan. The company released a repurchase plan this time, demonstrating long-term confidence.

Investment advice: We expect the company to achieve revenue of 2.973, 3.339, and 3.761 billion yuan respectively in 2024-2026, and net profit to mother of 0.366, 0.427, and 0.486 billion yuan respectively. The corresponding PE is 10.77/9.22/8.1 times, respectively, maintaining the “recommended rating”.

Risk warning: risk of macroeconomic fluctuations, risk of export revenue falling short of expectations, risk of downstream demand falling short of expectations, risk of nuclear power approval falling short of expectations