Introduction to this report:

Overseas markets are vast. The company seizes overseas opportunities with superior products, and enters the Great Plains business with increased product abundance.

Key points of investment:

Maintaining an increase in holdings rating, the target price was lowered to 31.40 yuan. The competitiveness of the company's products has improved, and overseas markets are developing smoothly. EPS for 2024/2025/2026 was increased by 1.33 (+0.13) /1.73 (+0.19) /2.26 (+0.33) yuan, respectively. Considering the company's advantages in overseas markets and growth brought about by product competitiveness, the 2024 PE valuation was given at 23.6X, the target price was lowered to 31.40 yuan, and an increase in holdings rating was given.

The overseas industrial control market is several times the size of the domestic market, and the product line is complete to help enter the Great Plains business. In 2023, the global industrial automation market reached 480.73 billion US dollars, while China's industrial automation market accounted for less than 10% of the global scale. The overseas industrial control market is a sea of stars. Judging from the core industrial control products, the overseas market for servo/low voltage inverters is about 4 to 5 times the size of the Chinese market, and the overseas market for small PLCs is about 5 to 6 times that of the Chinese market. The company's servo product line has fully entered the Great Plains business. It has formed a sufficiently wide product width and depth in terms of power range, bus type, stand-alone, multi-transmission, and motor type. At the same time, with the introduction of self-developed encoders, general servo products are expected to be profitable and profitable.

The company actively lays out overseas markets and seizes the high ground of overseas profit. The company seizes demand from overseas markets, mainly in regions such as the Belt and Road, Asia, Africa, and Latin America. So far, it has 313 domestic and foreign distributors, and established an Indian subsidiary in the first half of the year. At the same time, we are continuously increasing our efforts to develop markets such as Europe and America. Various product lines have passed CE and STO certification, and overseas offices and service outlets have been established.

24H1's overseas business revenue was 0.198 billion yuan, accounting for 25.63% of revenue, up 20.99% year on year. The gross margin reached 52.53%, which is significantly higher than the domestic market gross profit margin of 35.11%.

Industry jets have established a foothold in textile and other industries, gradually expanding into other emerging industries. The company's special aircraft products in the inverter industry include the SD500, SD650, EHS100, and EHS300 series, which performed well in traditional industries such as textiles, mining, and machine tools. In 2023, the gross margin of the company's domestic sales industry reached 36.78%, and export sales reached 55.02%, all higher than the overall gross profit margin. Among them, the overseas industry earmarked 0.105 billion yuan in revenue, accounting for 33.51% of the annual overseas revenue. At the same time, we are actively exploring and expanding the application of industrial special aircraft in emerging fields, such as robotics, heavy industry, HVAC, port machinery, metallurgy, etc., to customize and extend products through customer needs. Industrial jet products are expected to enhance product competitiveness and customer stickiness, and inject vitality into the company's continued high growth rate.

Risk warning: macroeconomic and exchange rate fluctuations; Great Plains business development falls short of expectations.