Event: according to the company's semi-annual report for 2023, H1 Company achieved revenue of 3.299 billion yuan in 2023, an increase of 4.21% over the same period last year, a net profit of 221 million yuan, an increase of 81.33% over the same period last year, and a deduction of 266 million yuan for non-net profit, an increase of 123.72% over the same period last year. From a quarterly point of view, the company's Q2 revenue in 2023 was 1.671 billion yuan, an increase of 3.26% over the same period last year, an increase of 2.67% over the same period last year; a net profit of 77 million yuan, an increase of 72.74% over the same period last year, a decrease of 46.97%; and a deduction of 129 million yuan for non-net profit, an increase of 126.97% over the same period last year and a decrease of 6.15% from the previous month.

H1 net profit increased significantly compared with the same period last year, and the LED industry recovered: in 23 years, H1, the domestic and foreign LED market gradually picked up, and the company achieved a net profit of 221 million yuan, an increase of 81.33% over the same period last year; deducted non-net profit of 266 million yuan, an increase of 123.72% over the same period last year, and profitability improved significantly. In 23, the comprehensive gross profit margin of H1 company was 29.85%, which increased 3.31pct compared with the same period last year. Among them, the gross profit margin of overseas business was 38.68%, which increased 6.13pct over the same period last year, mainly due to the company's market layout and brand advantages, the added value of products and solutions, and the positive impact of exchange rate fluctuations. The net interest rate was 6.50%, an increase in 2.68pct compared with the same period last year.

The 23-year Q2 gross profit margin was 27.63%, down 0.74pct from the same period last year and 4.51pct from the previous year; the net profit rate was 4.28%, up 1.63pct from the same period last year and 4.50pct from the previous year. In terms of expenses, the rates of Q2 sales, management, R & D and financial expenses are 15.56%, 4.59%, 5.82% and 5.20%, respectively, and the year-on-year changes are 1.83/-1.27/0.77/-3.03pct. In 23 years, H1 Company continued technological innovation, with R & D investment of 173 million yuan, an increase of 14.74% over the same period last year; exchange rate fluctuations led to a 234.07% decrease in absolute financial expenses compared with the same period last year.

The new packaging technology enhances the product advantage, and the high-end application layout opens the profit space: the company chooses the technology path of COB and MIP packaging to go hand in hand, equipped with the company's unique engine and self-developed system, which makes the company's products perform well in terms of display effect, screen energy saving by 50%, and lamp bead reliability by 10 times. In the Mini/Micro LED product layout: Zhouming UMini series products P0.4, P0.6, P0.7, P0.9, P1.1, P1.2, P1.5, P1.8 have achieved mass production, the cost has a competitive advantage, UMini has formed a mass sale; P0.4 Micro products have been officially released, and have the capacity of mass production. In 23, H1, the subsidiary Redio realized revenue of 739 million yuan, net profit of 136 million yuan and net interest rate of 18.41%. Redeo has built a large number of international XR virtual studios around the world, deeply ploughing the international high-end display field, with a market share of nearly 80%. At the same time, the company has carried out a variety of cooperation in AI application direction, partners including but not limited to Microsoft Corp, Dell, Baidu, Inc., iFLYTEK, etc., the company's virtual digital human has been fully integrated into all kinds of AI tools to form an integrated solution, and have delivered to customers.

Equity incentive objectives are clear, highlighting long-term growth confidence: the company's restricted stock incentive plan awarded a total of 434 people for the first time in 2023, accounting for 8.18% of the company's total employees. including the company's directors, senior managers, core technical (business) backbone personnel. This incentive plan intends to grant 21.999982 million restricted shares to the incentive target, accounting for about 2.01% of the total share capital of the company. Among them, 14.95 million shares of Class B rights and interests are granted for the first time, corresponding to the trigger value of RMB 100 million in 23-25, and the target value is RMB106.6 billion. The assessment goal of this incentive plan is clear, which demonstrates the company's confidence in long-term performance growth, and is expected to stabilize and attract high-end talents, promote the construction and stability of the company's core talent team, and promote the company's rapid development.

Raise the profit forecast and maintain the "overweight" rating: in the past 23 years, H1 has benefited from the sustained overseas boom and a moderate domestic recovery, and the company's profitability has been significantly enhanced. At the same time, the company speeds up the layout of XR, AI and other display applications, and the market penetration is further improved, so the company's 23-year profit forecast is raised. With the gradual recovery of domestic demand, the company is expected to benefit from Mini/Micro LED demand growth and emerging application scenarios continue to be rich, enhance profitability and the status of the industry chain. It is estimated that the company's net profit from 2023 to 2025 will be 571 million yuan, 754 million yuan and 948 million yuan respectively, the EPS will be 0.52,0.69,0.87 yuan respectively, and the PE will be 15x, 11x and 9x respectively.

Risk hints: market demand is lower than expected, technological innovation risk, exchange rate fluctuation risk, market competition risk.