Event: the company releases its 2023 half-yearly report. Operating income reached 718 million yuan in the first half of 2023, an increase of 24.96 percent over the same period last year. The net profit belonging to shareholders of listed companies was 51.4162 million yuan, an increase of 79.45% over the same period last year.

The net profit after deducting non-recurring gains and losses belonging to shareholders of listed companies was 50.7407 million yuan, an increase of 77.68% over the same period last year. Basic earnings per share is 0.47 yuan per share.

In the second quarter of 2023, net profit increased higher than the previous quarter, and gross profit margin continued to improve. The company's 2023Q2 realized a net profit of 31.3 million yuan, an increase of 101.1% over the same period last year and 55.6% over the previous year. The company's 2022Q1~2023Q2 sales gross profit margin was 14.16%, 14.01%, 12.88%, 10.64%, 15.01% and 15.21%, respectively. The gross profit margin continued to improve in the second quarter and reached a single-quarter high since 2021.

The company accelerated the acceptance of orders for high-end products in the first half of the year, and the new project has yielded benefits. According to the company announcement, it is estimated that the sales of stainless steel products of the company in the first half of the year increased by 102.02% over the same period last year. Itemized, by the end of June 2023, the company's S30432 products had completed receiving orders of 20315 tons (more than 5500 tons disclosed in the 2022 annual report), accounting for nearly 60% of the market share of domestic S30432 small diameter tubes. By the end of June 2023, the domestic stainless steel material TP310HCbN, which is the highest grade for boiler, has signed several orders for a total of 1988 tons (the 2022 annual report reveals that the order volume is more than 200t). According to the data, the order volume of the company's high-end products has increased significantly, and with the gradual delivery of follow-up orders, the profitability of the main business is expected to be further enhanced. According to the company's semi-annual report, the new manufacturing project of stainless steel and alloy steel seamless steel tubes for special equipment (with a total production capacity of 40, 000 tons) has reached the scheduled state in March 2023 and was officially put into production at the end of May 2023. Due to the short time to put into production and the need to continue debugging some new equipment, the benefit is 1.0647 million yuan by June 30, 2023.

The company continued to disclose large orders in the first half of the year, and coal power approval and construction are expected to be gradually landed. According to the announcement of the company on March 16, 2023, the company received a "bid winning notice" from Dongfang Electric Group Dongfang Boiler Co., Ltd., which won the bid of about 198.1501 million yuan, accounting for 17.65% of the company's audited business income in 2021. According to the company's announcement on April 28, 2023, the company received a "bid winning notice" from Harbin Electric Materials Co., Ltd., and Dongfang Boiler Co., Ltd., Dongfang Electric Group. The winning amount was about 180.6452 million yuan, accounting for 14.97% of the company's audited business income in 2022. According to the announcement of Changbao shares, the National Development and Reform Commission approved 8000 gigawatts of coal power projects each year in 2022 and 2023; it is expected that with the increase in demand brought about by the early approved projects gradually entering the construction phase and the gradual release of production capacity of new production lines, the company's thermal power steel pipe related business is expected to meet a simultaneous increase in volume and price, and its performance is expected to increase significantly.

Investment advice. The company focuses on seamless steel pipe manufacturing with small caliber energy, while capacity expansion, downstream demand continues to effectively support its profit release, and the increase in the share of high-end products is expected to support its higher valuation; we expect the company to achieve home net profit of 198 million yuan, 293 million yuan, 376 million yuan respectively from 2023 to 2025, corresponding to PE 19.5,13.2,10.3 times, maintaining the "buy" rating.

Risk tips: upstream raw material prices fluctuate sharply, seamless steel pipe demand is lower than expected, and there is uncertainty in the development of new business.