Incident: Donghua Testing revealed the 2024 mid-year report. Net profit to the mother increased by 35.30% in Q2. The company disclosed the 2024 mid-year report. In the first half of 2024, the company achieved revenue of 0.276 billion yuan, an increase of 37.75% year on year; net profit to mother was 0.074 billion yuan, up 65.11% year on year. In the split quarter, the company achieved operating income of 0.172 billion yuan in Q2 of 2024, an increase of 33.60% year on year, and net profit to mother of 0.047 billion yuan, an increase of 35.30% year on year.
The structural mechanics business grew steadily, and electrochemical workstations doubled year on year. Looking at the split business structure, the structural mechanical performance testing and analysis system business, which accounts for the highest share of the company's revenue, grew steadily, achieving revenue of 0.19 billion yuan in the first half of 2024, an increase of 36.24% over the previous year.
We believe that the downstream demand for this business is mainly related to the R&D boom in the specialty industry. After experiencing adjustments in the specialty industry in 2023, on the one hand, the overall development trend of the specialty industry has gradually been orderly, and demand has gradually entered a stable new normal; secondly, through active business adjustments, the company has gradually optimized its business structure and achieved revenue growth. The company's electrochemical workstations grew rapidly in the first half of 2024. During the reporting period, the business achieved revenue of 0.026 billion yuan, an increase of 135.51% over the previous year. We believe that the business developed rapidly, mainly due to the good development of the domestic new energy industry in recent years and the expansion of electrochemical workstation application scenarios. Second, the company has many years of R&D experience in electrical signal conversion, so the product may have certain competitiveness, and the business is expected to become a new growth curve for the company in the future.
Demand for equipment updates in the education sector may gradually rise, and the electrochemical workstation business is expected to directly benefit
In August 2024, the Shanghai Municipal Education Commission issued the “Shanghai Special Action Plan to Promote Large-scale Equipment Renewal in the Education Sector”, which states that the replacement of advanced teaching equipment should be accelerated, and that equipment that does not meet teaching needs, does not meet teaching-related configuration standards or affects safety of use, and has reached the minimum period of use. Support the upgrading of basic teaching laboratory instruments and equipment in municipal public colleges and universities. We believe that with the gradual improvement of the quality of education in China, the requirements for experimental instruments will also gradually increase. Therefore, if many domestic governments continue to promote the upgrading of teaching equipment in the future, then demand for electrochemical workstations will increase accordingly, and the company's revenue is expected to grow.
The sensor business is gradually forming platform-based capabilities, and long-term competitiveness continues to increase. According to the company announcement, the sensor products tested by Donghua have high reliability, high stability, and excellent indicators. They are suitable for various harsh environments, and are also rich in variety, including acceleration sensors, speed sensors, displacement sensors, strain sensors, multi-dimensional force sensors, and various types of slow variable sensors. In order to ensure the accuracy of the entire life cycle of sensor products, Donghua Testing has established a wholly-owned subsidiary, Jiangsu Donghua Calibration and Testing Co., Ltd., which covers all Donghua Test sensor products through the calibration capabilities approved by CNAS laboratories, can provide customers with third-party measurement, calibration and testing services, and continues to increase its market share in bridge inspection, aviation, special equipment and other industries. We believe that Donghua Testing's layout in the sensor business is gradually forming platform-based service capabilities, which directly helps the company's long-term competitiveness.
Investment advice:
The company is a leader in the structural mechanical properties testing industry. Its dominant business provides strong support for the company's performance growth. At the same time, the company is actively expanding new businesses for torque sensors, PHM intelligent maintenance platforms and electrochemical workstations. Multiple growth curves have gradually been formed. We expect the company's net profit for 2024-2026 to be 0.19 billion, 0.247 billion, and 0.306 billion, respectively, giving 30 times PE in 2024, corresponding to a 6-month target price of 41.10 yuan, maintaining the investment rating of Buy-A .
Risk warning: The expansion of new businesses and new segments falls short of expectations, and industry competition intensifies.