The single-quarter results were under pressure, and the profit side performed well in the first three quarters. ① The company's revenue for the first three quarters was 0.611 billion yuan, up 0.25% year on year; net profit to mother was 0.187 billion yuan, up 39.41% year on year; net profit after deducting non-return to mother was 0.172 billion yuan, up 39.33% year on year. ② By product, in the first half of 2024, the company's power software products and projects achieved revenue of 0.18 billion yuan, a year-on-year increase of 34.4%; environmental operation and maintenance services achieved revenue of 0.11 billion yuan, a year-on-year decrease of 8.9%; environmentally friendly intelligent monitoring instruments achieved revenue of 37.305 million yuan, an increase of 42.4% year on year; and intelligent power monitoring instruments reached 48.765 million yuan, an increase of 322.4% year on year. In the first half of 2024, the company's power software grew rapidly, and power monitoring instruments achieved rapid growth. ③ In the third quarter of 2024, the company achieved total revenue of 0.207 billion yuan, a year-on-year decrease of 23.02%; net profit to mother was 0.044 billion yuan, a year-on-year decrease of 30.41%, and both revenue and profit sides declined. ④ In the third quarter of 2024, the gross margin of science, technology and energy technology increased significantly, reaching 70.45%, an increase of 5.43 percentage points over the previous month.

The reason is, on the one hand, the result of the optimization of the company's product structure, and on the other hand, the further optimization of the company's cost control, including reduction in production costs due to large-scale production, including reduction in labor costs, as well as cost reductions due to process improvements.

Adhere to the digital, intelligent, and green development path, and implement the localization of intelligent instruments. ① Software and information technology products had revenue of 0.192 billion yuan in the first half of the year, or 25.77%, covering the two major fields of electricity and environmental protection. The company's electricity cost market performed well in the first half of the year. Among them, updates and upgrades of inventory software, distribution network software, and new energy software led to rapid sales growth. Customized software projects and services are generally concentrated in the second half of the year. The scale of the company's reserve projects stabilized in the first half of the year, and maintained a good growth trend. ② Intelligent instruments. Relying on industry-advanced intelligent online monitoring systems with independent intellectual property rights, the company has built three major business segments centered on power monitoring systems, environmental monitoring systems, and instrument operation, maintenance and service. In the first half of the year, operating, maintenance and service revenue was 0.115 billion yuan, a year-on-year decrease of 8.92%; orders were not executed in half a year of 0.401 billion yuan. The company achieved revenue of 58.9106 million yuan of intelligent power instruments, operation and maintenance and services, an increase of 97.85% over the previous year. In the first half of the year, the company's next-generation oil chromatography intelligent online monitoring system effectively solved market pain points and difficulties with self-developed core technologies such as “digital dynamic headspace balance degassing”. The product technology and excellent performance were fully recognized by authoritative testing institutions and the market.

Expand new energy storage and core businesses, and develop new portable chromatography products. ① In the nuclear power sector, both software products and intelligent power instrument companies have a high market share. The company will always develop related business around its field of expertise. Companies in the energy storage sector have launched cost-effective software products and will expand peripheral R&D and applications depending on the degree of commercialization of energy storage, such as the field of digital intelligence and IoT, safety control, etc. ② Portable chromatography is one of the new products the company is developing in 2024. Application scenarios such as on-site transformer devices require operating and maintenance personnel to take oil samples and send them to the laboratory for testing and comparison with on-site online monitoring instruments. Portable chromatographs are relatively lightweight, solving oil sample delivery personnel allocation and safety issues while achieving efficient and accurate detection and comparison.

The company plans to grant 16.0124 million share options to no more than 87 people, accounting for 4.22% of the total share capital. ① The exercise price is 13.91 yuan/share, and the maximum period of validity is 48 months. Registration for the award of the incentive program was completed on September 6, 2024. ② The company introduced incentives for core management and technical cadres to promote employees' enthusiasm and innovation. ③ The first assessment period is 2024. Based on 2023 net profit, the company's net profit growth rate in 2024 is not less than 15%. In the second assessment period (2025), based on 2023 net profit, the company's net profit growth rate in 2025 was not less than 30%.

The company repurchased 16.0124 million shares in 2024, accounting for 4.22% of the total share capital. ① The company announced a repurchase plan on January 24, 2024. It plans to use its own funds to repurchase shares between 90 million yuan and 0.18 billion yuan. The maximum repurchase price is 18 yuan/share. ② As of May 31, 2024, the company had repurchased a total of 16.0124 million shares, accounting for 4.22% of the total share capital, and the total payment was approximately RMB 0.18 billion. These repurchased shares will be used for future equity incentive plans or employee stock ownership plans. ③ After the repurchase, the number of shares with limited conditions of sale of the company was 30.1407 million shares, accounting for 7.95%.

Profit forecasting and investment advice. The company is a leading power cost software company, and has deployed smart instruments, focusing on smart environmental protection and smart grid construction, making every effort to break through “stuck neck” key components and machines, enrich the product line, enhance China's ability to innovate independently, and steadily achieve localized replacement of intelligent instrument manufacturing in specialized fields. It is expected that electricity informatization and the upgrading of power facilities will advance, and the company's various businesses will also follow and maintain the growth trend. By business, the software sales business, according to the March 9, 2022 investor relations activity record table quoted by Tonghuashun, the June 28, 2024 investor relations activity record table, the economic performance of the software industry from January to October 2024 released by the Ministry of Industry and Information Technology, and the software business revenue situation from January to June 2014 released by Baijiahao Hi-Tech Job Search Service, we predict that the industry will maintain a growth rate of 10% + in the next few years. The company is the industry leader and will maintain steady growth in 2024-26, 5%, respectively /13%/12%, gross margin is expected to maintain a steady and slight increase, at 88.08%/88.58%/89.08%, respectively; in the electricity monitoring business, the State Grid's procurement scale for intelligent oil chromatography online monitoring systems increased dramatically in 2024, and the company's product recognition is high. It is expected that this part of the business will maintain rapid growth. The growth rate in 2024-2026 is 60%/45%/40%, respectively. The economies of scale are expected to increase significantly, to 23.8%/28.8% in 24-26, respectively/ 33.80%; Environmental monitoring business. According to data from the China Business Industry Research Institute, the average compound growth rate of the industry in the past (2019-2024) was about 9.06%. Based on this historical data, we expect the company's 2024-2026 growth rate to be 5%/7%/5%, respectively, and the gross margin is expected to remain stable at 39.13%/39.33%/39.53%, respectively. We expect the company's net profit for 2024-2026 to be 0.336/0.421/0.508 billion yuan, and EPS of 0.89/1.11/1.34 yuan, respectively. The company will be given 20-25 times PE in 2024, with a reasonable value range of 17.74-22.17 yuan, giving it a “superior to the market” rating.

Risk warning: grid investment falls short of expectations; environmental protection industry development falls short of expectations; industry competition intensifies, etc.