Incident: Guodian Nanrui released its 2024 semi-annual report. 24H1 achieved operating income of 20.114 billion yuan, +10.02% year-on-year, and realized net profit of 2.709 billion yuan, +8.36% year-on-year, after deducting non-return net profit of 2.622 billion yuan, +7.72% year-on-year. Q2 achieved operating income of 12.416 billion yuan, +2.73% YoY, +61.27% month-on-month; realized net profit to mother of 2.114 billion yuan, +6.95% YoY and +254.82% month-on-month. The performance was in line with expectations.

The company's new orders continued to grow, and the mid-term dividend reached 1.08 billion yuan. 24H1's gross margin/net margin was 29.03%/14.27% respectively, +0.46pct/-0.25pct year-on-year, and the overall profitability of the company remained steady. In the first half of '24, the company signed new contracts of 28.7 billion yuan, +10.7% year-on-year. The company plans to distribute a cash dividend of 0.135 yuan (tax included) to all shareholders and a cash dividend of 1.08 billion yuan (tax included), accounting for about 39.93% of net profit to mother in the first half of the year.

New breakthroughs have been achieved in market development, and the domestic market has achieved another good result. The internal grid market is progressing steadily, winning bids for major projects such as the Tibet Grid SVG, the Mengdong Electric Power Market, Jiangsu Power Distribution Main Station, Shandong Tai'an Savings Fund, and Shanghai PMS3.0. The 4500V/3000A IGBT was connected to the grid at the Gusu converter station and operated smoothly. The 4500V/5000A IGBT passed a full range of on-site tests, and the 12MW high-capacity full-power wind power converter was connected to the grid.

Overseas and off-grid revenue have all broken through, and leading power grid equipment leaders have set sail overseas. (1) Overseas market: 24H1 overseas revenue reached 0.831 billion yuan, +92.8% year-on-year. The company's international projects progressed rapidly, successfully signed Saudi energy storage and static synchronous compensators, Pakistan's Merah DC stability control system, Brazil control, etc., and won the bid for Saudi ADMS system operation and maintenance, etc. (2) Off-net market: 24H1 off-network revenue reached 8.93 billion yuan, +24.41% year-on-year. A rapid breakthrough was made in the off-grid market, winning bids for major projects such as Jiugang Smart Energy Management and Control Center, Aluminum-coated Smart Energy Control Center and energy storage, Inner Mongolia Tuquan distributed camera, safety monitoring of the Liaoning Reservoir dam, and Huaneng's prefabricated cabin framework.

Investment advice: We expect the company to achieve net profit of 8.223/9.309/10.692 billion yuan in 24-26, corresponding to the current PE of 23.2/20.5/17.9X respectively, maintaining a “buy” rating.

Risk warning: grid investment falls short of expectations, UHV investment falls short of expectations