Event: 23H1 achieved an operating income of 2.061 billion yuan, + 18.56% year-on-year, and a net profit of 93 million yuan, reversing losses over the same period last year.

Q2 Company realized operating income of 1.188 billion yuan, + 8.59% year-on-year, and net profit of 103 million yuan, + 168.88% compared with the same period last year.

The business of clean energy, thermal energy and electric energy is developing rapidly, and the kitchen electricity business is under pressure.

Solar thermal utilization business: 23H1 solar photothermal market in China has declined slightly, but solar photothermal hot water system is still loved by consumers because of its low cost, convenience and other characteristics. The company's "Sun Rain" and "four Seasons Mu Song" are the head brands of domestic solar energy, so we expect a small increase in the solar energy revenue of H1 company. The company's wholly-owned subsidiary Sun Rain Group achieved a net profit of 11.9948 million yuan, an increase of 248.15% over the same period last year, while the subsidiary four Seasons Mu GE achieved a net profit of 11.9471 million yuan, reversing losses over the same period last year.

Air energy business: two new air energy assembly lines built in 23H1's Lianyungang base have been put into production, and the layout of the industrial chain has been continuously improved. with the expansion of business scale, the profitability of air energy business has also improved. Sunrise Oriental Air Energy Co., Ltd., a wholly-owned subsidiary of H1 Company, achieved a net profit of 9.1482 million yuan, a year-on-year turnround.

Photovoltaic energy storage business: in order to accelerate the development of the company's energy storage business, the company has newly introduced fully automatic energy storage lithium battery module and PACK production line, which can achieve a production capacity of about 600MWh in the first phase.

Kitchen electricity sector: we expect 23H1's kitchen electricity sector revenue to decline slightly.

Q2 profitability has been greatly improved, increasing investment in research and development, and controlling sales expenses.

The gross profit margin of H1 company is 29.56%, and the gross profit margin of Q2 company is 30.81% compared with the same period last year and + 1.37pct compared with the same period last year. We believe that the main reason for the improvement of Q2 company gross profit margin is:

1) decrease in the cost of raw materials; 2) improve the gross profit level of the company's air energy business on a large scale.

In terms of expenses, Q2 company sales / management / R & D / financial expense rates are respectively year-on-year-4.38/-0.26/+0.44/+0.09pct.

Benefiting from the reduction in the rate of sales expenses, the net interest rate of Q2 company improved significantly to 8.54% compared with the same period last year.

Profit forecast: we are optimistic about the development trend of the global heat pump industry. As an important company in domestic heat pump exports, the company is expected to benefit from the high demand for overseas heat pumps. At the same time, the company's photovoltaic EPC and energy storage business is also expected to provide a new business growth point for the company. We estimate that in 2023-2025, the company will achieve an operating income of 45.38 million yuan, 54.37 billion yuan, 15.9% compared with the same period last year, and a net profit of 3.51 million yuan, 4.20 yuan, and 16.4%, corresponding to PE14.19/11.86/10.19x.

Risk factors: lower-than-expected heat pump exports, rising raw material costs, real estate affecting the demand for water heaters, water purifiers and other products