Event: in the first half of 2023, the company achieved operating income of 1.513 billion yuan, down 1.39% from the same period last year, and its net profit was 72 million yuan, down 34.17% from the same period last year.

New capacity climbing period encountered downstream cold wave, cost reduction and efficiency to achieve quarterly improvement. Jiangsu Bomin Phase II high-level HDI project was put into production in early August 2022. During the climbing phase of the new capacity, the downstream market demand such as intelligent terminals was weakening and the farming rate was seriously insufficient. However, the early investment formed assets and expenses, and the related depreciation and amortization affected the company's performance to a great extent. The consumer electronics market did not recover significantly in the second quarter. By strengthening operation management, optimizing internal organizational structure and implementing lean production, the company has achieved cost reduction and efficiency, and the decline in revenue and profit in a single quarter has been significantly narrowed. It is believed that with the recovery of downstream prosperity, the company's main business is expected to show better profit recovery flexibility.

PCB business taps potential to increase efficiency, "PCB+" integrated layout to build a deep moat. In recent years, the competition in the domestic PCB market is fierce, the homogenization of products is serious, and the production capacity increases rapidly. the company's PCB business continues to focus on new energy, data communications and intelligent terminals, tapping potential and increasing efficiency through product technology upgrading to resist the downward impact of the industry. at the same time, the company has successfully created a "PCB+ components + solution".

One-stop service ability to enhance the breadth and depth of cooperation with core customers and build their own moat.

Chuangxing focus on business investment, waiting for domestic replacement opportunities. The company plans to invest 5 billion yuan in Hefei Economic Development Zone to build ceramic substrate and IC substrate industry base: the company has international leading AMB ceramic substrate technology, independent solder development capability, sintering technology and manufacturing experience of printed circuit boards, and successfully developed the third generation semiconductor head customers and overseas automobile enterprises supply chain customers in the first half of the year. By adding the first high-end fine line mSAP process seal loading board production line in Jiangsu Bomin, the company has the production capacity of high-end IC carrier board. On the whole, both the ceramic substrate and the IC carrier plate have considerable domestic substitution space, and the layout in advance is expected to help the company seize the opportunity of domestic substitution in time.

Investment suggestion: the company's 2023-2025 net profit is expected to be 162 million yuan, 214 million yuan and 278 million yuan respectively, the current stock price corresponding to 42.2,31.8 and 24.6 times PE, maintain the overweight rating.

Risk tips: (1) Jiangsu Bomin production capacity growth rate is not as expected; (2) ceramic substrate new customer expansion is not as expected.