Incident: The company released its 2024 interim report. Revenue for the first half of 2024 was 3.47 billion, up 3.6% year on year; net profit to mother was 0.24 billion yuan, up 8.3% year on year. We achieved revenue of 1.72 billion in the second quarter, up 3.6% year on year and down 1.8% month on month. Net profit returned to mother in the second quarter was 0.13 billion, up 6.2% year on year and 8.2% month on month.

Domestic demand for forklifts was relatively stable in the first half of the year, and overseas demand improved. The company's large vehicles continued to grow at a high rate. Class III trucks improved markedly over the same period last year, and the forklift sector led to steady revenue growth.

Expense control is good, and net interest rates are rising steadily. In the first half of 2024, the company's comprehensive gross margin was 21.8%, down 0.6 percentage points from the previous year; the net profit margin was 6.8%, up 0.2 percentage points from the previous year. The decline in gross margin was mainly due to changes in product structure and an increase in the share of second-class vehicle revenue. The company's expense ratio for the first half of the year was 13.2%, down 1.1 percentage points year on year. Among them, sales/management/R&D/finance expense ratios were +0.6/-0.4/-0.1/-1.1 percentage points year on year, respectively. The decline in financial expenses was mainly due to fluctuations in the Russian ruble exchange rate. The company's overall cost control was good, and the net interest rate rose steadily.

The electrification rate of large vehicles has increased significantly, and the results of the company's large vehicle strategy are beginning to show. The electrification rate of domestic forklifts increased significantly in the first half of the year. Sales of Class I, II, and Class III forklifts increased 19.0%/22.6% year-on-year respectively. The overall electrification rate of the industry in the first half of the year reached 70.8%, up 2.9 percentage points from the end of 2023, and the electrification rate of large trucks reached 32.0%, up 0.8 percentage points from the end of 2023. The company grasps the trend of electrification of forklifts, actively expands truck production capacity, continuously improves the R&D and marketing system for large truck products, ensures the sustainable development of truck strategies, and creates new growth points.

The French subsidiary empowered Zhongding, and the system integration business resources were smoothly integrated. In the intelligent logistics sector, the company strengthened effective control over domestic and overseas subsidiaries: Zhongding integrated strengthened technology upgrades, adjusted the business structure, and proposed new investments to build logistics equipment manufacturing bases; France's SAVOYE is actively expanding new markets, building new factories, and expanding production capacity. In the first half of the year, resource collaboration among the company's intelligent logistics subsidiaries was strengthened, effective integration of its resources was achieved, and a good foundation was laid for future growth and development.

Profit forecasting and investment advice. The company's net profit for 2024-2026 is expected to be 0.53, 0.61, and 0.72 billion yuan respectively. The compound net profit growth rate for the next three years is 16.5%, maintaining a “buy” rating.

Risk warning: Risk of overseas market expansion falling short of expectations, risk of macroeconomic fluctuations, risk of exchange rate fluctuations.