Key points of investment

The four major sectors collaborated to increase. 24H1 net profit to mother increased 43.04% year on year 2024H1. The company achieved total operating income of 3.095 billion yuan, an increase of 22.16% year on year; net profit to mother 0.419 billion yuan, an increase of 43.04% year on year; net profit after deducting non-return to mother of 0.393 billion yuan, an increase of 42.43% year on year. With 2024Q2, the company achieved total operating income of 1.706 billion yuan, an increase of 22.61% year on year; net profit to mother 0.235 billion yuan, up 24.24% year on year; net profit after deducting non-return to mother 0.22 billion yuan, an increase of 22.76% year on year.

Wire business: The recovery in downstream demand drove business growth. High-speed communication line product development progressed smoothly in 2024H1. Wire products achieved revenue of 0.767 billion yuan, an increase of 38.27% year on year; achieved a gross profit margin of 15.09%, an increase of 0.21 pct year on year. Driven by the rapid recovery of the data communication industry and increased demand for products in other downstream markets, the company's wire business segment ushered in new opportunities for development. In terms of high-speed communication lines, the company has completed the development of PCIe 6.0 products. The product has low performance attenuation and high reliability, and is currently being tested in small batches; it has completed the development of a variety of single-channel 224G high-speed communication line samples. Currently, some single-channel 224G high-speed communication line products have completed important customer verification.

Electronics business: The market share of emerging industries continues to increase, profitability continues to increase 2024H1. Electronic products achieved revenue of 1.203 billion yuan, an increase of 16.85% over the previous year; achieved a gross profit margin of 40.61%, an increase of 6.34 pcts over the previous year. With the continuous expansion of the company's high-end heat-shrinkable product range and the improvement of key performance, the market share of the company's electronic series products in emerging industries such as nuclear power, automobiles, rail transit, and medical care continues to increase. In addition, the decline in the price of the main raw materials for 2024H1 electronic products has also contributed to an increase in their gross margin.

Power business: Investment in national grid engineering construction continued the steady growth trend, with a comprehensive layout of 2024H1 in various application areas. Power products achieved revenue of 0.619 billion yuan, an increase of 17.76% year on year; achieved a gross profit margin of 40.67%, an increase of 0.93 pct year on year. The company continues to promote the comprehensive layout of power cable accessory products in various application fields, focusing on R&D, innovation and market development for high-voltage, UHV and intelligent power grid products. The company also actively lays out overseas markets, gradually promoting the company's power products to the international market by participating in many large-scale overseas industry exhibitions and adopting online promotion methods.

New energy business: The wind power business is steady, and the leading position of DC charging guns is consolidated in 2024H1. New energy products achieved revenue of 0.432 billion yuan, an increase of 25.83% over the previous year; a gross profit margin of 31.30%, a year-on-year decrease of 5.14 pcts. 2024H1, the wind power business is running smoothly, and the feed-in power is 0.176 billion kWh. Products related to the company's NEV business have maintained a good growth trend. The first phase of the Wuhan Caidian Central China Regional New Materials Industrial Park project invested by the company has been completed, and some process equipment for the company's NEV business is being put into production one after another.

Profit forecasting and valuation

Raise profit forecasts and maintain a “buy” rating. The company firmly adheres to the strategic goal of “new materials and new energy” and is deeply involved in the electronics, electricity, wire and new energy business. Considering that the company's electronics business profit exceeded expectations and the wire business growth exceeded expectations, etc., we raised the company's profit forecast for 2024-2026. The estimated net profit to mother was 0.896, 1.19, and 1.405 billion yuan (0.85, 1.025, and 1.201 billion yuan, respectively before the increase), with year-on-year increases of 27.90%, 32.87%, and 18.02%, respectively. The corresponding EPS was 0.71, 0.94, and 1.12 yuan, respectively. Maintain a “buy” rating.

Risk warning

Macroeconomic environment and policy risks; increased risk of market competition; risk of fluctuations in raw material prices.