Q1 profit growth is bright, and the rail business is growing strongly. The company released a quarterly report for 2024, 24Q1 company to achieve revenue of 3.925 billion yuan, up 27.20 percent year-on-year, to achieve a net profit of 0.568 billion yuan, up 30.44 percent year-on-year, non-net profit of 0.461 billion yuan, up 45 percent year-on-year, the overall performance slightly exceeded expectations. Rail-to-rail business achieved high growth, Q1 revenue of 2.12 billion yuan, up 43.7 percent YoY, rail-to-rail electrical equipment revenue growth of 29% YoY, rail-to-rail engineering machinery, signal systems have also achieved rapid growth, revenue of 468/42% YoY, respectively.

Fear of market competition, emerging equipment continues to rise steadily. According to the first quarter report, the revenue of emerging equipment business reached 1.77 billion billion yuan, up 13% year on year. Among them, IGBT, sensor, electric drive, industrial variable flow revenue was 8.3/0.6/3.8/0.3 billion yuan, 22.4/-48.6/10.8/18.4% YoY. IGBT business in the market competition intensified situation still maintain growth, thanks to the company by virtue of high-voltage to low-voltage extension ability to differentiate competition, semiconductor subsidiaries to introduce strategic investment to help Yixing and Zhuzhou production line to speed up the construction, yield and chip output rate continued to improve.

net interest rate increased from the same period, and contract liabilities continued to grow. Q1 gross margin of 34.1, year-on-year plus 1.64pct, home-to-home net margin of 14.5, the same month-on-month, respectively, 0.36/0.80pct, the improvement of profitability on the one hand benefited from the increase in the proportion of rail equipment, on the other hand, from the steady recovery of the gross net interest rate of emerging equipment, the ability to control the cost reduction. The company's Q1 end-of-contract liabilities increased by 17% month-on-month at the end of 23, with ample orders in hand to protect full-year results.

earnings forecasts and investment recommendations. The company's current valuation of the historical sub-position is low, both growth and dividend attributes, is expected to come out of the differences to usher in the dawn. It is estimated that the net profit attributable to the parent in 24-26 will be 37/43/5.1 billion yuan, giving the company a PE valuation of 25x in 2024, corresponding to the reasonable value of A shares 64.96 RMB/share; Considering the premium factor of AH shares, the reasonable value of H shares is 38.98 Hong Kong dollars/share, maintaining the "buy" rating.

risk tips. The risk of overcapacity in the power semiconductor industry, the downside risk of price and profitability, and the risk of less than expected investment in the rail industry.