According to the semi-annual report released by the event company, the total revenue in the first half of 2023 was 623 million yuan, down 3.06% from the same period last year, and the net profit was 249 million yuan, an increase of 18.22% over the same period last year.

Q2 performance increased by 103.4%, in line with expectations. 2023H1 has revenue of 623 million yuan (YOY-3.06%) and Q2 revenue of 308 million yuan (YOY+12.4%) in a single quarter. 2023H1's parent net profit is 249 million (YOY+18.22%), and Q2's single-quarter results are 114 million (YOY+103.4%), which is basically in line with expectations.

The company's 23H1 revenue decline is mainly due to the Jinghan Yu testing business due to the industry downturn superimposed downstream customer procurement plan adjustment and other reasons and a sharp decline of 24.6%. With the gradual opening of the Jinghan Yu Nanjing testing Center, the increase in new orders in the second half of the year will help significantly narrow the decline in annual testing business revenue compared with the same period last year. Q2 revenue growth year-on-year is due to the rapid growth of wheel business and brake disc business, which we expect to achieve steady growth for the whole of 23 years, while brake disc business may double due to the expansion of commercial aviation demand.

The reverse growth of the company's 23H1 performance is mainly due to the increase of value-added tax rebate and the reduction of comprehensive income tax rate. Q2 performance increased by 103.4% compared with the same period last year, mainly due to the substantial growth of brake disc and wheel business with high gross margin.

The company's 23H1 gross profit margin is 68.4%, year-on-year downward 2.4pct, period expense rate 7.5%, year-on-year downward 0.2pct, R & D expenditure rate is the same as the same period last year, and the company's overall profitability has declined slightly.

Inventory is high and revenue continues to grow without worry. The company's 23H1 inventory was 678 million, an increase of 24.6% over the beginning of the period, including 193 million of raw materials, an increase of 28.7% over the beginning of the period, 52 million of commodities issued, an increase of 117.6% over the beginning of the period, and an increase of 115 million of finished goods, an increase of 35.5% over the beginning of the period. it indicates that the company's income will continue to grow in the future. In addition, thanks to better rebates and VAT rebates, the net cash flow generated by the company's 23H1 operating activities was 30 million, an increase of 114.3% over the same period last year, and the quality of operation was significantly improved.

Landing gear business from 0-1, brake disc business from 1-10. Brake disc business is the basic set of the company, which has obvious consumable properties, military aviation demand is cyclical, and income fluctuation is relatively large. With the improvement of self-controllable requirements of civil aviation, the company is actively expanding the application of brake discs in the civil aviation market, with remarkable results, and is expected to become an important fulcrum of the company's brake disc business from 1 to 10 in the future.

In addition, the company formally completed the delivery of the landing gear landing system in 2021, realizing a great-leap-forward transformation from parts supplier and material supplier to system supplier and overall solution solver. With the expansion of the demand for new aircraft, it is expected that the landing gear business will grow explosively in the next two years.

Investment suggestion: the company has a number of military models under development, and the company will continue to grow with the gradual production of related models in the future. In addition, the company actively arranges civil aviation, the Israeli army and the people, and there is a huge space for import substitution. It is estimated that the company's net profit from 2023 to 2025 will be 460 yuan, 628 million, and 780 million respectively, with a compound growth rate of 41.4% over the next two years. EPS will be 1.39 pm 1.89 pm 2.35 yuan, and the current stock price will be 29x/21x/17x corresponding to PE. We believe that the company, as the leader in the domestic aviation brake field, has a clear share of the industry, and will benefit from the batch loading and upgrading of military aviation in the future, with broad development prospects and maintaining the "recommended" rating.

Risk Tip: the risk of military orders falling short of expectations and product price fluctuations.