The company issued a mid-term performance forecast for 2023, with an estimated return net profit of 0.14-21 million yuan in the first half, with a reduction of 61.57%, 74.38%, and a deduction of 0.12-18 million yuan, or 68.50%, 79.00%. The company has made great achievements in opening up the external market in Yunnan Province, and orders form a certain support for performance growth. Maintain the company's buy rating.

Support the main points of rating

The net profit of returning home decreased greatly in the first half of the year. The company estimates that the net profit of 2023H1 will be 0.14-21 million yuan, with a decrease of 61.57%, 74.38%, and a deduction of 0.12-18 million yuan, or 68.50%, 79.00%.

2023Q2 expects to realize the net profit of 0.10-17 million yuan, with a decrease of 23.4%, 55.0%, and 40.3%, 64.8%, respectively. The company's return net profit fell sharply in the first half of the year.

The supply requirements of major customers have slowed down, and the company's shipments have declined compared with the same period last year. In the first half of 2023, due to the slow supply requirements of the company's main customers in the first quarter, superimposed individual project customers asked for delayed delivery, resulting in a decline in shipments in the first quarter compared with the same period last year. With the consolidation of the company's projects under construction, the interest expenses of depreciation and convertible bonds increase rapidly, which leads to an increase in the company's financial expenses, and the increase in investment in new R & D projects will also lead to an increase in R & D costs. as a result, the company's return net profit decreased significantly in the first half of the year.

The market development is very effective, and the order forms the support to the performance. 1) in September 2021, the State Council issued the regulations on Seismic Management of Construction Engineering. The formal implementation of the regulations will greatly increase the coverage of the mandatory policy of building seismic isolation, and the market demand for seismic isolation is expected to expand accordingly. 2) as a leading enterprise in the construction damping and isolation industry, Zhen'an Technology continues to expand its capacity scale and improve its capacity layout, so it is expected to be the first to benefit from the expansion of the industry. 3) the company continues to expand the market outside Yunnan Province. At the end of 2023Q1, the proportion of external income in Yunnan Province has exceeded 70%, and the market development has been very effective. As of April 30, 2023, the company mainly in-hand orders and intended orders with a total contract amount of 1.209 billion yuan (including tax), the shipment amount of 483 million yuan (including tax), the performance has a certain support.

Valuation

Considering that the recovery of demand in the second half of the year remains to be seen, we have partially lowered our profit forecasts. It is estimated that the company's revenue from 2023 to 2025 will be 10.1,14.5 and 2.13 billion yuan, the net profit will be 1.2,1.8 and 260 million yuan, and the EPS will be 0.49,0.71,1.04 yuan, maintaining the company's buying rating.

Main risks faced by rating

The rise in raw material prices exceeded expectations, the landing effect of the policy was not as expected, and the progress of capacity expansion was not as expected.