Event: on August 30, 2022, the company released its semi-annual report for 2022. In the first half of 2022, the company achieved operating income of 745 million yuan, down 13.14% from the same period last year, and realized net profit of 48 million yuan from the same period last year, down 49.22% from the same period last year. Net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 41 million yuan, down 53.77% from the same period last year; gross profit margin was 22.8%, down 5.57pct from the same period last year, and 1.37pct was higher than the previous year.

Comments: optimistic about the new energy and automation tide, the company's core competitiveness in engine pumps, gearbox pumps, electronic pumps, vacuum pumps, motors and other products, electronic pumps and variable displacement pumps are important growth points for the development of the company.

The epidemic has had an impact on the industrial chain of the automobile industry, and the company's passenger car market is growing against the trend. In the first half of the year, the company achieved operating income of 745 million yuan, down 13.14% from the same period last year, and the net profit belonging to the parent company decreased by 49.22% compared with the same period last year. In the second quarter, the company realized operating income of 346 million yuan, down 19.2% from the same period last year, 13.15% from the previous month, and realized a net profit of 16 million yuan from the same period last year, down 66.02% from the same period last year and 47.56% from the previous year. Among the company's main business, the diesel engine oil pump business used in commercial vehicles accounts for a relatively large proportion, and because the market scale of the commercial vehicle industry is smaller than that of the passenger vehicle industry, the company accounts for a relatively large proportion in the commercial vehicle industry. The operation of diesel engine oil pump business is strongly related to the overall situation of the commercial vehicle industry. In the first half of 2022, the epidemic situation of COVID-19 in Jilin, Shanghai and other areas aggravated, which had a serious impact on China's automobile industry chain, so the company's commercial vehicle market declined greatly, while with the relief of the epidemic, the market of the commercial vehicle industry recovered. Diesel engine oil pump business is expected to resume growth. In terms of passenger cars, the company's sales revenue of gasoline engine oil pumps has bucked the trend compared with the same period last year, which we believe is mainly due to the company's breakthrough in the field of passenger car oil pumps, which has made up for the impact of the downstream supply chain.

Continue to promote market expansion in the field of new energy, electronic pumps have been designated by BYD and Songzhi. Under the tide of new energy and automation, in order to achieve the strategic goal of "electrification and new energy", the company has increased the development and application of electronic pump products, covering two major categories: automobile electronic water pump and electronic oil pump. BYD and Songzhi were designated in the first half of the year. 1) Electronic water pump: the company obtained the electronic water pump project of the thermal management system of Liuzhou Songzhi Automobile Air conditioning Co., Ltd. in June 2022 and is expected to start mass production in October 2022. Songzhi is one of the leading enterprises of automobile thermal management related products in China, with the advantage of high-quality customer resources and large and stable demand; 2) Electronic oil pump: the company obtained the fixed point of BYD's new product in April 2022, matching electronic oil pump products for BYD pure electric vehicles, which is expected to be produced in September 2022, and the downstream BYD has a strong demand. In the first half of 2022, BYD sold 638157 new energy vehicles, an increase of 324.84 percent over the same period last year, surpassing Tesla, Inc. to become the top seller of new energy vehicles in the world.

Variable displacement pump technology is leading, opening up the blue ocean of hybrid vehicles in the future. With the rich production experience and excellent technology of "energy saving and integrated modularization", the company realizes the large-scale application of variable displacement pump technology in engine variable displacement pump and quantitative pump. Traditional fuel vehicles and hybrid cars use the same variable displacement pump technology, the company can rely on the leading variable displacement pump technology to achieve seamless switching from traditional fuel vehicles to hybrid cars. At present, BYD, a leading company in the field of hybrid vehicles, is a customer of the company, and the company has newly obtained the fixed point of Li Auto Inc. 's fully variable displacement oil pump products this year, and the ideal plan is to achieve the goal of 20% of China's smart electric vehicle market share by 2025. Bring more potential market space for the company.

Investment suggestion: due to the adverse impact of the epidemic on the automobile supply chain in the first half of the year, the company's home net profit forecast for 2022-2024 will be reduced from RMB 2.50,27,426 million to RMB 2.03 million, maintaining the "buy" rating.

Risk hint: the penetration rate of new energy vehicles is not as expected, capacity expansion is not as expected, and downstream customer penetration is not as expected.