Investment highlights

The company released its 2024 interim report, achieving revenue of 4.252 billion yuan in the first half of the year, a year-on-year increase of 16.8%; The net profit attributable to the parent company was RMB517 million, a year-on-year increase of 1.2%, and the net profit attributable to the parent company was RMB519 million after excluding GDR exchange gains and losses, an increase of 49.8% over the same period last year. The deduction of non-attributable to the parent company was 472 million yuan, a year-on-year increase of 11.4%.

From the perspective of products, industrial automation and intelligent manufacturing related products are prosperous, and the control system (control system and control system + instrument) achieved revenue of 1.725 billion yuan, a year-on-year increase of 17.7%; Industrial software (industrial software and control system + software + others) achieved revenue of 1.11 billion yuan, a year-on-year increase of 3.2%; Instrumentation achieved revenue of 353 million yuan, a year-on-year increase of 72.2%. From the perspective of industries, the revenue of the petrochemical and chemical industries continued to grow steadily, the oil and gas, pharmaceutical, food and beverage industries were prosperous, and the income continued to maintain a rapid growth trend, with the revenue of the petrochemical industry increasing by 27.0%, the income of the chemical industry increasing by 26.0%, the income of the oil and gas industry increasing by 117.3%, and the income of the pharmaceutical and food industry increasing by 29.2%.

The international business is progressing smoothly, and the performance is breaking through rapidly. 24H1 The company's internationalization strategy continues to advance and deepen. The company's overseas business income was 343 million yuan, a year-on-year increase of 188.2%, accounting for about 8.1% of the company's main operating income. Overall, the company's overseas business is progressing smoothly. (1) The global operation capability has been continuously enhanced. The company's international marketing system focuses on the deployment of Southeast Asia, the Middle East, Central Asia, Europe, the Americas, Japan and other regions, with an overseas team of nearly 300 people, and 6 subsidiaries in Singapore, Saudi Arabia, Kazakhstan and other countries, and the overseas localization operation capability has been greatly improved.

(2) Breakthrough in overseas markets. During the reporting period, the company signed new overseas contracts of 500 million yuan, a year-on-year increase of 63.8%. The company has deepened its cooperation with international high-end customers such as Saudi Aramco, BASF Germany Indonesia, Pertamina, Thailand Indorama, and Petronas, Malaysia oil company, and has obtained the highest level of certification of Pertamina Group's CSMS and won the bid for its liquefied natural gas (LNG) tank farm storage project. Successfully obtained the AMR intelligent robot project of Saudi Aramco Central Warehouse, etc. We believe that the company is actively seeking partners from high-end product and technology suppliers in the global industry, and its international ecosystem and global layout and operation capabilities are constantly expanding.

The company continued to invest in research and development, and new products were released during the reporting period. In 24H1, the company's R&D expenses were 444 million yuan, a year-on-year increase of 9.3%, accounting for 10.5% of revenue. In June, the company launched two new products, namely the Universal Control System (UCS) and the Time-Series Pre-trained Transformer (TPT), an AI time series model for the process industry. UCS builds software-defined, fully digital, cloud-native control systems and leads the way in revolutionizing control system innovation. TPT is a generative AI algorithm framework independently developed by the company, which learns the general rules of industrial plant operation by integrating and pre-training massive production operation, process, equipment and quality data from different industries, so as to greatly improve the modeling efficiency. At present, TPT has made breakthroughs in chlor-alkali, thermoelectric, petrochemical and other devices, and compared with traditional control, TPT can achieve system automation rate of more than 95%. We believe that the company has a strong focus on R&D, and we expect R&D results to continue to translate into revenue.

【Investment Suggestions】

We believe that the company focuses on the automation, digitalization and intelligent needs of the process industry, and has a deep accumulation in the process industry and a wide moat. Based on the concept of "AI + data", the company deeply integrates a large number of industrial data, industrial knowledge, industrial models, industrial experience, etc., builds an industrial AI value system, and empowers traditional factories to transform into future factories with intelligent and autonomous operation. We are optimistic that the company will combine technology and industry experience in the process industry to innovate and empower more in the AI era. We expect the company's operating income in 2024/2025/2026 to be 104.17/122.71/14.264 billion yuan, net profit attributable to the parent company to be 14.18/17.78/2.091 billion yuan, corresponding to EPS of 1.79, 2.25, 2.64 yuan, PE of 21.69, 17.30, 14.71 times, giving an "overweight" rating.

【Risk Warning】

The market development is not as expected;

Macro pressures intensify.