Event: according to the company's semi-annual report of 2023, the operating income in the first half of the year was 1.365 billion yuan, an increase of 10.40% over the same period last year; the net profit was 37.167 million yuan, an increase of 134.66% over the same period last year; and the non-net profit was 24.2186 million yuan, an increase of 105.30% over the same period last year. The comments are as follows:

The performance is higher than the same period last year, and the order of building ceramics is improving. Benefiting from the improvement in orders for building ceramic products and the increase in gross profit margin of Eagle Brand and Ruixin products, the company's revenue / home net profit in the first half of the year increased by 101,135% respectively compared with the same period last year. Of this total, Q2 achieved operating income of 828 million yuan, an increase of 11.89% over the same period last year, a net profit of 29.0431 million yuan, an increase of 101.39% over the same period last year, and 22.0699 million yuan of non-net profit, an increase of 71.58% over the same period last year. 1) the revenue of building ceramics has increased by about 25%. In terms of building ceramics, product orders increased in the first half of the year compared with the same period last year, driving the sector's revenue up about 25% year-on-year. In terms of polymer composite finishing materials, the income of home decoration materials / automobile interior decoration materials / film / artificial leather / fireproof panels in the first half of the year was 1.13pm 2.00pm 1.79max 0.42max 130 million respectively, year-on-year changes-1.13pm 2.59max 7.49max 9.72max 3.19%. 2) the price of raw materials decreased significantly, and the gross profit margin increased compared with the same period last year.

In the first half of the year, the average price of resin powder / plasticizer, the company's main raw materials, decreased by 29.93 per cent respectively compared with the same period last year, and the company's gross profit margin / net profit margin was 22.40 per cent respectively, an increase of 1.94/2.26pct over the same period last year. Among them, the gross profit margin of Eagle Brand increased by 2.29pct compared with the same period last year, and the gross profit margin of Ruixin products increased by 3.61pct. 3) the cash flow has increased significantly, and the expense rate has increased slightly. The net cash flow generated by the company's operating activities in the first half of the year was 200 million yuan, an increase of 920.90% over the same period last year, mainly due to the increase in the recovery of customer funds in the current period. In the first half of the year, the company's expense rate was 18.17%, an increase of 0.58pct over the same period last year. Among them, the sales / management (including R & D) / financial expense rates were 6.66, 9.80, 1.71%, respectively, an increase of 0.14/0.35/0.10pct over the same period last year.

Channel sinking + layout of new business areas to open up long-term growth space. The company continues to sink channels and expands its national distribution stores through continuous investment and education. As of the first half of the year, Eagle has 1243 dealers and 1295 stores, with a store area of 300000 square meters. At the same time, the Eagle Brand Company also launched two kinds of stores: Eagle Life and Eagle Brand transformation, and implanted products such as wall panels, cabinets and floors into the terminal stores of the Eagle Brand Company, gradually realizing the integrated delivery of building ceramic products to indoor door and wall cabinets, providing customers with an one-stop solution for the systematic output of products, and launching the renovation of old houses and the deepening of hardcover housing business. Eagle brand company from a building materials brand into a consumer brand in the field of pan-home. In addition, the company focuses on the three main channels of home improvement retail, assembly and engineering, strengthens the sales transformation of home decoration retail channels, increases the stickiness of cooperation with assembly companies, and broadens the resources of individual engineering projects, so as to expand the coverage of the sales network. In the field of public clothing, the company entered the field of old medical reform through the acquisition of Tianhui Construction Department, tapping the development opportunities of the old medical reform market, and has gradually begun to undertake the construction and transformation of medical old reform projects. Mr. Wu Qichao, the controlling shareholder and actual controller of the company, subscribed all the A shares issued by the company to a specific object with cash, which is conducive to optimizing the capital structure of listed companies, reducing financial risks and improving the ability to resist risks. at the same time, it also shows the confidence of the actual controller in the future development of the company.

Investment advice: high performance in the first half of the year, look forward to future growth, maintain the overweight rating. It is estimated that the company's net profit from 2023 to 2025 will be 1.03,1.32 and 160 million yuan respectively, an increase of 162%, 28% and 22% respectively over the same period last year, and the corresponding price-to-earnings ratio of PE will be 18, 14 and 12 times respectively. The downstream demand of the automobile decoration industry is improving; the company integrates Eagle brand, finishing materials and Tianan integration and other holding subsidiaries to create an integrated platform to create business coordination and create new growth points of performance.

Risk tips: raw material prices rise or exceed expectations; downstream demand of real estate may be lower than expected; prices of automobile interior decoration materials decline; industry competition intensifies; impairment meter mentions the risk of M & An integration, etc.