Core ideas:

The company released 2023 semi-annual report, the performance is in line with expectations. The company's revenue in the first half of the year was 400 million yuan, a year-on-year change of-1.01%, and a net profit of 53.33 million yuan, a year-on-year change of-58.93%.

The slight decline in performance is mainly affected by equity incentive fees and the EPC base for the same period last year.

The transformation of the business model has been accelerated and the company's revenue structure has been significantly optimized. According to the split of the company's semi-annual report, the product sales income of 23H1 Company is 385 million yuan (accounting for 96.5% of the total income), and the project contracting income is 14 million yuan (only 3.5%). Product sales increased by about 47.5% over the same period last year.

The acceleration of spare parts and equipment sales is the key direction of the company's high-quality management. Specifically, the year-on-year growth rates of mineral processing spare parts and mineral processing equipment are 30.6% and 134.2% respectively, accounting for 72.4% and 16.3% of the total income, which is 17.5 / 9.4 percentage points higher than that of 22H1.

Mining procurement demand accelerated recovery, the company continued to expand in-hand orders. In terms of contract liabilities, the amount of 23H1 is 167 million yuan. Compared with the end of last year / the same period last year, it increased by 124.4% and 629.7% respectively.

The fullness of contract liabilities fully reflects that the company has plenty of orders on hand and sufficient momentum for subsequent performance release.

Downstream copper and gold mines are booming, and the high growth of the company's new rubber products is being realized. Due to the continuous high prices of copper and gold in the lower reaches, the leading mining machine has a strong power to increase production. According to 23Q2 production data released by Vale SA, copper production increased 41 per cent year-on-year and 18 per cent month-on-month. The production increase of the old mine and the acceleration of the construction of the new mine are expected to stimulate the demand for downstream equipment and spare parts. The permeability of the new rubber spare parts of the superposition company is currently low and continues to improve, and there is a broad market space for the spare parts business in the future.

Profit forecast and investment advice. We estimate that the 23-25 year net profit of the company will be RMB 1.01 USD 166pm. Considering that the company belongs to a small number of leading companies with downstream high prosperity + new products + new market resonance, which is obviously scarce in China, the current order performance is in a period of rapid rise. We give the company a reasonable PE of 35.0x in 2023, corresponding to a reasonable share price of 33.7 yuan per share. Maintain a "buy" rating.

Risk tips: copper mine price decline risk; green energy transformation is not as expected; overseas mining investment process is not expected; rubber spare parts permeability is not expected; raw material price fluctuation risk.