According to the company's semi-annual report of 2023, the company realized operating income of 499 million yuan in the first half of 2023, an increase of 21.16% over the same period last year, and a net profit of 102 million yuan, an increase of 9.77% over the same period last year. In the second quarter alone, the operating income was 265 million yuan, an increase of 21.99% over the same period last year. The net profit reached 52 million yuan, down 3.70% from the same period last year. Although in the first half of the year, due to the impact of the downstream PCB boom and the lower-than-expected industrialization process of composite copper foil, the company's performance was slightly lower than expected. With the gradual improvement of downstream demand in the future, on the one hand, as the only enterprise to achieve large-scale mass production of coil horizontal membrane plating equipment in China and even in the world, the company will fully benefit from the release of industry demand, on the other hand, the company's continuous product expansion will open up a new growth space. Continue to maintain the buy rating.

Support the main points of rating

Income grew steadily in the first half of the year, slightly less than expected due to downstream demand. In the first half of 2023, benefiting from the continuous growth of sales of new energy equipment and other equipment, the company achieved steady growth in operating income, but it was still lower than we expected. We believe that the main reason is that the demand for PCB electroplating equipment is weak due to the downward prosperity of downstream PCB, and the delay of the acceptance node of new energy equipment caused by the industrialization process of superimposed composite copper foil is not as expected.

The gross profit margin remained basically stable, and the expense front led to the pressure on the net profit margin. The company's overall gross profit margin in the first half of 2023 was 43.33%, a year-on-year decline of 0.35pct, which remained basically stable, and we believe that the reason for the slight decline is due to changes in product structure. In terms of expenses, the sales / management / R & D / financial expense rates in the first half of 2023 were 7.33%, 5.15%, 7.90%, 1.26%, respectively, compared with the same period last year, resulting in short-term pressure on the company's net interest rate in the first half of the year, which decreased by 2.13pct to 20.49% compared with the same period last year.

The industrialization of composite copper foil is advancing steadily, and the company insists on new product research and development to open up new growth space. In June 2023, double Star New Materials and Wanshun New Materials successively announced that they had obtained orders for composite copper foil, indicating that the industrialization process of composite copper foil is still advancing in an orderly and steady manner. as the only enterprise to achieve large-scale mass production of coil horizontal membrane plating equipment in China and even in the world, the company has supplied more than 20 customers and will fully benefit from the release of industry demand in the future. In addition, the company insists on the research and development of new products, magnetron sputtering equipment, and mass production of 12-target magnetron equipment; at the same time, 24-target magnetron equipment is being debugged; in terms of photovoltaic copper plating, solar vertical continuous wafer plating equipment (the third generation equipment) has been basically completed and is currently being debugged in the factory. Delivery is expected around August, and the maturity of new products will open up more room for growth for the company.

Valuation

Taking into account the weak demand for PCB electroplating equipment and the lower-than-expected acceptance progress of new energy equipment, we downgrade the company's profit forecast and expect revenue of 1.362 billion yuan and net profit of 2.93 billion yuan for 2023-2025. Maintain the buy rating.

Main risks faced by rating

The promotion of the downstream application of composite copper foil is not as expected; the expansion of new products is not as expected; the risk of raw material price fluctuations; the intensification of industry competition.