The company released its 2024 mid-year report

The company released its 2024 mid-year report. In the first half of 2024, the company achieved operating income of 2.463 billion yuan (+5.83%), net profit to mother 0.079 billion yuan (+38.78%), net profit of 0.067 billion yuan (+48.15%) after deducting net income to mother, and a weighted average return on net assets of 2.55% (+0.68pct).

Focusing on the hot and cold business, the company's net profit increased significantly year-on-year

During the reporting period, the company's profitability increased significantly. The overall gross margin of H1 in 2024 was 16.46%, a slight decrease from the same period last year and the full year of 2023, but the net margin reached 3.22%, an increase of 0.66 pct over the same period last year. The reason for this is, on the one hand, that the company focuses heavily on the hot and cold business, deepens market segmentation, and continues to strengthen its main business; on the other hand, the high-quality development of Songyang Compressor, a subsidiary of the company's assets restructuring last year, not only actively expanded the European market, enabled rapid growth in export revenue, but also effectively coped with rising raw material prices. Actual profitability increased steadily in the first half of 2024.

Companies that continue to cultivate advantageous market segments and expand new businesses such as CCUS and thermal management have always been committed to developing the hot and cold industry. In terms of traditional industries, in the field of industrial refrigeration, the company actively served high-end customers, and its influence in the brand industry continued to increase, and signed a number of integrated petroleum refining and chemical projects during the reporting period; in the field of commercial refrigeration and refrigeration, the company developed and designed products and solutions that better meet China's needs, and signed a number of cold chain logistics projects; in the field of air conditioning and environment, the company attached great importance to R&D and innovation, and continuous transformation and upgrading, not only developed products around commercial air conditioning, central air conditioning, and special air conditioning segments, but also provided targets for various fields such as electronics factories, high-end real estate, and rail transit sexual solutions. At the same time, the subsidiary Bingshan Air Conditioning is also vigorously developing the air source heat pump business. In terms of new businesses, the domestic industrial energy saving and environmental protection industry is growing rapidly, and the company continues to provide customers with new energy-efficient, environmentally friendly and efficient products. In the first half of 2024, the company made good progress in new businesses such as CCUS and energy storage thermal management.

Investment advice

We believe that domestic cold chain demand is expected to continue to grow this year. Although demand from downstream chemical and other industries is currently weak, large-scale equipment renewal policies will be catalyzed. Judging from the Chinese report, the increase in the company's profit margin exceeded our previous expectations. Therefore, we raised the company's profit forecast to: 2024-2026 is 5.483/6.248/7.158 billion yuan (the previous value of 2024-2026 was 5.441/6.199/7.102 billion yuan); the 2024-2026 forecast net profit to mother is 0.145/0.196/0.252 billion yuan, respectively (before 2024-2026 0.123/0.18/0.244 billion yuan); EPS corresponding to 2024-2026 is 0.17/0.23/0.30 yuan (the value before 2024-2026 was 0.15/0.21/0.29 yuan). The PE corresponding to the company's current stock price is 22/16/13 times. Maintain a “buy” investment rating.

Risk warning

1) Risk of policy fluctuations; 2) Risk of increased market competition affecting profit margins; 3) Risk of large fluctuations in raw materials; 4) Risk of information based on research not being updated in a timely manner to fully reflect the company's latest situation.