Event: according to the company's semi-annual report for 2023, the revenue of H1 company in 2023 was 983 million yuan, down 13.46% from the same period last year; the net profit was-79 million yuan, down 168.62% from the same period last year; and the non-net profit was-114 million yuan, down 220.77% from the same period last year. On a quarterly basis, Q2 achieved revenue of 558 million yuan in 2023, an increase of 0.55% over the same period last year and 31.42% month-on-month growth; net profit from home was-29 million yuan, down 166.31% from the same period last year and up 41.79% from the same period last year; deducting non-net profit of-45 million yuan, an increase of 35.37% month-on-month.

Flat demand affects performance, Q2 profitability improved month-on-month: in 2023, the relatively low demand downstream of H1 led to a decline in the company's revenue scale as a whole, weak order prices and unsaturated Q1 growth rate led to a decline in gross profit, while management expenses increased. Exchange rate fluctuations lead to net loss of financial expenses, which puts pressure on the company's performance. In 23, H1 company's gross profit margin was 12.18%, year-on-year-13.04pcts; net profit margin was-9.75%, year-on-year-19.88pcts. Q2 gross profit margin is 15.07%, year-on-year-8.73pcts, month-on-month + 6.68pcts; net profit rate is-6.82%, year-on-year-14.71pcts, month-on-month + 6.78pcts. The overall growth rate of Q2 company showed a stable upward trend, and the gross profit margin and net profit rate improved. In terms of expenses, the rates of sales, management, R & D and financial expenses of Q2 company in 23 years were 1.12%, 10.87%, 6.00%, 8.16%, respectively, and the year-on-year changes were 0.07/5.24/0.35/3.14pcts, of which Q2 management expenses reached 61 million yuan, an increase of 93.98% over the same period last year, mainly due to the orderly progress of the construction of the second phase of the company, and the continuous expansion of the company's personnel. The personnel expenditure and the preparation cost for the second phase increased.

Focus on the field of advanced packaging and steadily promote the construction of the second phase of the project: according to the company's annual report of 23 years, according to Yole, the global advanced packaging market is expected to grow at a compound annual growth rate of 6.6% from 2019 to 2025 and reach 42 billion US dollars by 2025; at the same time, compared with traditional packaging, the application of advanced packaging is expanding, and it is expected that advanced packaging will account for more than 50% of the total packaging market by 2026. The company focuses on middle and high-end advanced packaging business, and has completed mass production and mass sales of 5G PAMiD module products used in RF communications in the first half of 23 years; completed the development and mass production of copper bump (Cu pillar bump) and tin bump (Solder bump) and wafer fan-in (Fan-in) technology based on high-density interconnection; completed FC-BGA technology development and mass production. At the same time, the Bumping and CP projects invested by the company's own funds are connected to the line, so the company has the one-stop delivery capability of "Bumping+CP+FC+FT", which can effectively shorten the delivery time of customers from wafer bare wafers to finished chips; in addition, the company has mastered RDL and bump processing capabilities through the implementation of Bumping projects, laying a technological foundation for the subsequent development of wafer-level packaging, fan-out packaging and 2.5D/3D packaging.

The development of the field of automotive electronics is progressing smoothly, and equity incentives demonstrate confidence in the development: the company actively distributes automotive electronics and other fields. With the gradual enrichment and improvement of the application field of the company's products, the company's revenue scale is expected to further expand. In 23 years, H1 company's automotive electronic products have passed the certification of terminal car factory and Tier1 manufacturer in many fields such as intelligent cockpit, on-board MCU, image processing chip and so on. H1 implemented equity incentive in 23 years, awarding 274 incentive objects 4.4 million restricted shares (accounting for 1.08% of the total share capital) at a price of 12.66 yuan per share. The incentive plan sets assessment indicators that the annual operating income growth rate is set to exceed 25%, 50%, 100%, compared with 22 years in 23-24-25. The company's incentive plan is conducive to mobilize the enthusiasm of employees, bind the interests of the core team, effectively prevent brain drain, assessment objectives are clear, challenging, highlighting the company's medium-and long-term development confidence.

Downgrade profit forecast and maintain "overweight" rating: the company's main business is IC packaging and test solution development, packaging processing and finished product testing services for different types of IC chips, and supporting services related to IC packaging and testing. The company's main products include high-density fine pitch bump flip products (FC products), system-level packaging products (SiP), flat unpinned packaging products (QFN/DFN), MEMS sensors (MEMS). The company makes concerted efforts in many aspects, such as the market and its own product line layout, while deepening the existing business and increasing market share, the company continues to improve the layout of the company's product line, and actively promotes the construction of Bumping, wafer-level packaging, FC-BGA and other production lines. With the gradual recovery of market demand and the steady progress of capacity construction projects, the company's revenue and net profit are expected to return to stable growth. It is estimated that the return net profit of the company from 2023 to 2025 is 163 million yuan, 271 million yuan and 426 million yuan respectively, the EPS is 0.40,0.66,1.05 yuan respectively, and the PE is 74x, 45x and 28x respectively.

Risk tips: exchange rate fluctuation risk; downstream demand is lower than expected; new product research and development is not as expected; capacity expansion is not as expected.