In the first half of 2023, the company realized operating income of 1.763 billion yuan / year-on-year-0.92%, net profit of 36 million yuan / year-on-year-25.81%, and deducted non-return net profit of-3 million yuan / year-on-year-106.53%. The company is the leader of powder metallurgy in China, taking into account the weak downstream demand for automobiles and consumer electronics due to macroeconomic influence, we downgrade the company's 2023max 2024 net profit to the parent company, which is estimated to be RMB259 million (the original forecast is RMB 308pm), and increase the homing net profit forecast for 2025 to RMB 340 million. Taking into account the company's metal soft magnetic materials (SMC) as a priority development direction, long-term capacity growth space, the future is expected to fully benefit from photovoltaic, energy storage and other new energy industry high bearing, combined with the industry average valuation level, give the company 2023 27 times PE valuation, adjust the company target price to 9 yuan, maintain the "buy" rating.

The net profit of 23H1 declined. In 2023, H1, the company realized revenue of 1.763 billion yuan, down 0.92% from the same period last year, realized net profit of 36 million yuan, down 25.81% from the same period last year, and deducted non-return net profit of-3 million yuan, down 106.53% from the same period last year. Q2 in 2023, the company realized revenue of 961 million yuan, an increase of 7.48% over the same period last year and 19.78% month-on-month growth The net profit of returning to the mother was 16 million yuan, down 60.23% from the same period last year and 15.08% from the previous year; the net profit after deducting non-return was 12 million yuan, down 73.11% from the same period last year, turning losses into profits.

Metal soft magnetic materials (SMC) plate rapid growth, the proportion of revenue continues to increase. In 2023, H1, the company seized the development opportunities of optical storage and other new energy industry. SMC plate entered the "fast track", achieving revenue of 488 million yuan, an increase of 67.23% over the same period last year, accounting for 27.96% of the company's main business income, and continued to increase since 2020. In June 2023, the company announced that the company won the right to use state-owned construction land numbered 2023-26 to the west of Churen Road, Chu Hou Industrial Park, Linqu County, for 20 million yuan. The "annual production capacity of 60,000 tons of soft magnetic material industry base project" is expected to be accelerated. In addition, according to the company's 2023 mid-term report, the construction of the SMC production line at Ningbo headquarters has also achieved preliminary results, some high-end SMC products have been supplied in small batches, and the metal soft magnetic material business is expected to continue to grow in the second half of the year.

The metal injection molding (MIM) plate ring ratio is improved, and the product structure is optimized step by step. In 2023, H1, the company's MIM segment achieved revenue of 382 million yuan, down 34.01% from the same period last year, mainly affected by factors such as the decline in the prosperity of the consumer electronics industry, but its main business income increased by 71.06% in the second quarter compared with the first quarter. In the field of consumer electronics, the company focuses on providing customized development and production services of MIM parts + hinge components for folding screen mobile phones, and gradually weakens the impact of fluctuations in the consumer electronics industry by promoting long-term business such as medical devices and automobiles to optimize product structure.

The traditional powder metallurgy (packs) plate dropped slightly compared with the same period last year, exploring the direction of new technology. In 2023, H1, the company's packs segment achieved revenue of 876 million yuan, down 1.77% from the same period last year, mainly due to a 6.11% year-on-year decrease in main business income in the field of home appliances. In May 2023, Ningbo Dongmu Guangtai, an associate of the company, acquired a 3% stake in Shenzhen Xiaoxiang Electric and held a total of 12% after the acquisition. Shenzhen Xiaoxiang Electric has independently developed core technologies such as concentrated magnetic axial flux motor and control algorithm, which is conducive to strengthening the company's technical research on motor and non-automotive powder metallurgy applications. In addition, according to the company's 2023 mid-year report, the company expands the application scene by increasing the integration of packs and SMC technology, and cooperating with packs suppression technology and various process technologies to SMC.

Risk factors: downstream demand is lower than expected; the company's production expansion plan is not as expected; raw material prices are rising sharply; industry competition is intensifying day by day.

Profit forecast, valuation and rating: the company is the leader in powder metallurgy in China, taking into account the macroeconomic impact, automobile, consumer electronics downstream demand is sluggish, we downgrade the company 2023x24 net profit vested in the parent company is expected to be 205x2500000 yuan (the original forecast is 308pm 420 million yuan), increased 2025 homing net profit forecast of 340 million yuan, corresponding to the EPS forecast of 0.33pm 0.42pm 0.55. Select Platinum Science and Technology, Dragon Magnetic Technology, Yunlu and Yuean New Materials as comparable companies, the current average PE (Wind consensus expectation) of the above companies in 2023 is about 27 times, considering that the company takes SMC as the priority development direction, the long-term capacity growth space is broad, and it is expected to fully benefit from the high profile of photovoltaic, energy storage and other new energy industries in the future, giving the company a valuation of 27 times PE in 2023, and lowering the company's target price to 9 yuan. Maintain a "buy" rating.