Incident: The company released its 2024 semi-annual report. In the first half of 2024, it achieved operating income of 0.531 billion yuan, a year-on-year decrease of 1.36%, and achieved net profit due to mother of 0.101 billion yuan, an increase of 0.14% over the previous year, after deducting non-return net profit of 0.089 billion yuan, a year-on-year increase of 1.52%. It plans to distribute a cash dividend of 1 yuan (tax included) for every 10 shares to all shareholders. Among them, in 2024Q2, the company achieved operating income of 0.289 billion yuan, a year-on-year decrease of 6.18%; realized a net profit of 0.055 billion yuan, a year-on-year decrease of 5.6%, and a year-on-year increase of 22.36%.

All businesses have remained stable, and profitability is under slight pressure. 24H1's revenue for power monitoring and integrated substation monitoring products and systems decreased by 2.42% to 0.226 billion yuan, gross margin decreased by 1.18 pct to 47.31% year on year; revenue from energy efficiency management products and systems increased 3.75% to 0.175 billion yuan, gross margin decreased 1.08 pct to 47.66% year on year; revenue from fire and electrical safety products and systems decreased 19.30% to 0.041 billion yuan year on year, and gross margin decreased 1.10 pct year on year to 1.10 billion yuan year on year. 47.29%; corporate microgrid - other revenue increased 1.87% year on year to 0.026 billion yuan, gross margin decreased 1.78 pct year on year to 45.10%; electricity sensor revenue increased 7.06% year on year to 0.059 billion yuan, and gross margin decreased 1.84 pct year on year to 45.28% year on year. The overall gross margin of the 24H1 company fell 1.22pct year on year to 47.07%, and the net profit margin to mother rose 0.28 pct year on year to 18.96%.

Domestic demand fluctuates greatly, and the focus is on increasing overseas development. 1) Domestic market: In the first half of 2024, demand from various downstream industries in the domestic market was clearly divided. The company actively promoted EMS 2.0 and EMS 3.0, and achieved good results in the fields of utilities, new energy and industrial parks. 2) Overseas markets: 24H1's overseas revenue increased 72.46% year-on-year to 0.025 billion yuan. The company has successfully expanded its customer base in more than 120 countries, with the Southeast Asian and European markets accounting for more than 50% of total business contributions. The company has accelerated the deployment of overseas channels. It has established an extensive network of agents and dealers in various regions such as Asia, Europe, the Middle East, Africa, South America and North America, and has customized corresponding solutions for different regional markets, which is expected to be promoted rapidly in the future.

The promotion of EMS 3.0 has paid off, and the decline in R&D has helped sales. The company incorporated the optical storage and charging platform on the basis of EMS 2.0 to achieve integrated flexible control of source network load storage and charging, and developed and upgraded to EMS 3.0, a microgrid smart energy platform. The company's EMS 3.0 has completed the product development structure. Since its launch in 2023, dozens of projects have been in operation, and it is expected that the company's profitability will continue to improve in the future. In addition, the company formed a linkage between R&D and sales, and some R&D personnel sank into the market, provided technical guidance to the sales team, and helped promote the product.

Maintaining a “buy” rating: 24H1 In the context of large fluctuations in domestic demand, the company actively promotes iterative products and accelerates the expansion of overseas markets. We maintain the original profit forecast. The company's net profit forecast for 24-26 is 0.242/0.303/0.38 billion yuan, respectively, and the corresponding EPS is 1.13/1.41/1.77 yuan, respectively. The current stock price is 14/11/9 times PE for 24-26, respectively. The company's products are continuously upgraded and sales channels are continuously improved, speeding up the layout of overseas markets to help future growth, and maintaining a “buy” rating.

Risk warning: the degree of electricity improvement falls short of the expected risk, the microgrid market release falls short of the expected risk, the risk that the company's channel expansion falls short of expectations, and the risk of increased market competition.