Core ideas:

The company announced its half-yearly report for 2023 and showed stable results in the first half of the year. In the first half of 2023, the company's revenue was 441 million yuan, an increase of 6.39% over the same period last year. The net profit returned to the mother was 42 million yuan, down 3.43% from the same period last year. The non-return net profit was 41 million yuan, an increase of 0.75% over the same period last year.

The income of UHMWPE fiber business has been realized for the first time, and the domestic market income has increased rapidly. In the first half of 2023, the company earned 421 million yuan in functional safety gloves, up 7.54 percent over the same period last year, and 1 million yuan in general safety gloves and other protective equipment, an increase of 128.55 percent over the same period last year. Ultra-high molecular weight polyethylene fiber achieved income of 17 million yuan for the first time. In the first half of 2023, the company's foreign market revenue was 359 million yuan, down 7.23% from the same period last year, and the domestic market revenue was 82 million yuan, an increase of 195.95% over the same period last year.

The gross profit margin decreased slightly, the expense rate increased slightly during the period, and the operation quality was high. The company's gross profit margin in the first half of 2023 was 22.10%, down 1.31 percentage points from the same period last year, mainly due to part of the existing production capacity of functional security gloves used for the early development of the domestic market. The gross profit margin of functional security gloves in the first half of the year decreased by 0.36 percentage points compared with the same period last year. And UHMWPE is in the production capacity climbing period, with a gross profit margin of-11.91%. During the period, the expense rate was 9.69%, an increase of 0.43% over the same period last year, mainly due to an increase of 26.80% in sales expenses over the same period last year. The net operating cash flow was 45 million yuan, an increase of 48.70% over the same period last year.

Be optimistic about the company's performance in the second half of the year is expected to accelerate. In May 2023, the company completed the restricted stock incentive plan for the first time, the performance evaluation target increased sharply, and the growth rate of revenue / deducted non-homed net profit target in 2023 was not less than 40%. The first phase of the "72 million dozen functional safety protection gloves project" in the first phase of the Security Industrial Park is initially planned to put into trial operation in August 2023, and the full capacity of UHMWPE fiber is expected to reach 3600 tons by August 2023.

Profit forecast and investment advice. It is estimated that the EPS of the company from 2023 to 2025 will be 1.08 yuan per share, 1.44 yuan per share and 2.02 yuan per share respectively. Maintain the company's 2023 price-to-earnings ratio of 23 times, a reasonable value of 24.75 yuan per share, and maintain a "buy" rating.

Risk hint. Macroeconomic fluctuation risk; market competition risk; raw material price fluctuation risk.