Introduction to this report:

The recovery in the company's performance did not happen overnight. Although it fell short of expectations, the gap was exhausted. The long-term trend is still positive. Key investment points:

The target price was raised to 17.01 yuan to maintain the “increase in holdings” rating. Based on the first-quarter results and our judgment on the pace of industry recovery, the 2023 and 2024 profit forecasts were lowered, and the 2025 profit forecast was added. The 2023-2025 EPS was 0.34 (-0.09), 0.56 (-0.07), and 0.85 yuan respectively. Considering that the company's profit margin is in the recovery period, the target price was raised to 17.01 yuan with reference to the average PE of comparable companies in 2024, and the target price was raised to 17.01 yuan to maintain the “increase in holdings” rating.

Q1 performance was slightly lower than expected. The company achieved total revenue of 3,007 billion yuan in 2022, an increase of 6.98% over the previous year, and net profit of 438 million yuan, an increase of 122.14% over the previous year, after deducting non-profits of 83 million yuan, reversing losses over the previous year. The first quarter of 2023 achieved operating income of 720 million yuan, an increase of 1.14% over the previous year, net profit of 3.62 million yuan, a year-on-year decrease of 90.91%, after deducting non-net profit of 22.26 million yuan, an increase of 8.91% over the previous year. First-quarter results were slightly lower than expected.

First-quarter results were still affected, and industrial digitalization was the main growth point. Most of the company's revenue confirmed in the first quarter experienced external environmental disturbances in December 2022. We believe that the company's overall performance cannot be repaired in a quarter after experiencing a shock. It will take time for a complete recovery, but we can see quarterly improvements. The company's self-research business accounted for 48.02% of revenue in 2022, an increase of 8% over the previous year. Digitalization in the manufacturing sector is still in a period of rapid increase in penetration, and the industrial digitization business will continue to be the company's most important performance growth point in 2023.

At present, the company's downside risks have basically been released. With the announcement of the quarterly report, short-term performance risks have been released, the company's performance will improve quarterly in the future, and the debt-conversion pressure will basically end. The short-term downside risk has basically been released, and the company's stock price has entered a cost-effective range.

Risk warning: macroeconomic fluctuations, rising labor costs, promotion of own products falls short of expectations