Description of the event

The company released its 2024 semi-annual performance report. 2024H1 achieved revenue of 10.084 billion yuan, a decrease of 7.46%; realized net profit due to mother of 0.526 billion yuan, a decrease of 5.44%; and realized net profit deducted from non-mother of 0.503 billion yuan, a decrease of 1.18%.

Incident reviews

Revenue and profit declined slightly, mainly due to pressure on the new elevator market. In the company's elevator business, 2024H1 elevator equipment sales achieved revenue of 5.974 billion yuan, a year-on-year decrease of 7.07%; other businesses such as elevator installation and maintenance achieved revenue of 3.474 billion yuan, a year-on-year decrease of 6.35%. The decline in elevator equipment sales is mainly related to the new elevator market, and there is a strong correlation between the new elevator market and the completed housing area. The completed area of 2024M1-7 houses was 0.3 billion square meters, a decrease of 21.8% over the previous year. From this perspective, the company's decline was less than that of the industry.

The gross profit margin and the period expense ratio both increased year over year. 2024H1, the company's gross margin also increased 0.65pct to 16.43%. In terms of cost ratio, 2024H1 also increased 0.88pct to 9.20% during the company period. Among them, sales expenses increased 0.13pct to 3.16%, management expenses increased 0.57pct to 4.14%, financial expenses decreased 0.31pct to -1.75%, and R&D expenses increased 0.5 pct to 3.66%.

The renewal and transformation cycle is expected to improve, and the share of aftermarket business will gradually increase. At the end of 2023, the number of elevators in use in China has exceeded 10 million. The service market will continue to expand as the number of elevators in use increases. The number of old elevators that have been in operation for more than 15 years has increased. Coupled with the introduction of large-scale equipment renewal policies, the old elevator renewal market is expected to enter a period of accelerated growth. 2024H1, the company's other businesses such as elevator installation and maintenance accounted for 34.45% of revenue (mainly including installation, transformation and maintenance business, where the installation business is highly correlated with the new elevator market, and the transformation and maintenance business is weakly related to the new elevator market), which is a further increase from 32.04% in 2023. As the share of aftermarket business continues to increase, the company's cash flow and performance stability are expected to improve, and valuations are also expected to gradually move closer to leading overseas companies.

Build smart elevators and accelerate digital transformation. In terms of smart products, Shanghai Mitsubishi Elevator has launched the LNK smart elevator digital solution, which has the characteristics of high safety, high real-time performance and high stability, and brings cutting-edge smart products to customers through continuous iterative application of the latest digital technology. In terms of intelligent manufacturing, Shanghai Mitsubishi Elevator has built advanced manufacturing equipment and automated flexible production lines based on industrial robot+AGV+5G technology in multiple application scenarios. In terms of intelligent services, Shanghai Mitsubishi Elevator is deeply involved in the elevator IoT and has established a complete eCare service system based on the elevator remote service system to monitor elevator operation status and fault information in real time.

Profit forecasting and valuation

The company's 2024-2026 revenue is expected to be 20.938, 21.444, 22.898 billion yuan, with year-on-year growth rates of -6.20%, 2.42%, and 6.78%; net profit to mother is 0.954, 1, 1.089 billion yuan, and year-on-year growth rates of -4.59%, 4.89%, and 8.82%. The company's 2024-2026 performance corresponding PE was 12.20, 11.63, and 10.69 times, respectively. It was covered for the first time, and a “gain” rating was given.

Risk warning:

The decline in real estate has exceeded expectations; competition has intensified risks.