Event: Yingqu Technology releases its 2023 semi-annual report. 2023 the operating income of H1 company was 1.844 billion yuan, down 19.40% from the same period last year; the net profit was 203 million yuan, down 40.82% from the same period last year; and the net profit after deducting non-return was 171 million yuan, down 45.34% from the same period last year.

Among them, the operating income of 2023Q2 in the current quarter was 972 million yuan, down 2.35% from the same period last year; the net profit was 123 million yuan, down 34.53% from the same period last year; and the net profit after deducting non-return was 128 million yuan, down 28.64% from the same period last year.

The decline in 23Q2 revenue improved from the previous month, and the non-engraving machine business grew well. 23H1's revenue reached 1.844 billion yuan, down 19.40% from the same period last year, mainly due to weak demand in overseas end markets and inadequate inventory removal in the industry. Among them, the company's 23Q2 realized revenue of 972 million yuan, down 2.35% from the same period last year, significantly narrowing the decline, while increasing by 11.58% compared with Q1.

In terms of business, 1) in terms of innovative consumer electronics, 23H1 achieved revenue of 515 million yuan, down 58.82% from the same period last year, mainly due to weak demand in the end market and high inventory in the industry. The repair pace of orders for major categories of household engraving machines is relatively slow, and the delivery pace of electric power bicycle products slows down. However, the company has successfully achieved the mass production delivery and production capacity climbing of the core components of e-cigarette, while making every effort to promote the mass production progress of the whole machine project, and the increment of 23H2 contribution can be expected. 2) in terms of intelligent control components, 23H1 achieved revenue of 627 million yuan, an increase of 30.41% over the same period last year, and customer orders for water-cooled heat dissipation control systems were quickly repaired. at the same time, in the field of industrial control, the company continued to launch products with high R & D and manufacturing difficulty and high value, and cut into the customer's new business department, which is expected to contribute increment. 3) in terms of automotive electronics business, 23H1 achieved a revenue of 219 million yuan, an increase of 44.31% over the same period last year, and has passed the examination and approval of two overseas mainframe factories and obtained the qualification of suppliers. It is expected that the allocation share of products in the whole vehicle factory will continue to increase, and business performance will continue to maintain rapid growth. 4) in terms of healthy environment business, 23H1 achieved revenue of 260 million yuan, an increase of 64.91% over the same period last year. Zhonghuan Technology, a subsidiary of Zhonghuan Technology, made a major breakthrough in the market of large-scale air purifiers and developed and launched more than 10 high-looking household-style indoor air treatment products and wearable purifier products to achieve rapid repair.

23Q2 gross profit margin compared with month-on-month repair, net profit pressure caused by year-on-year decline in exchange earnings 23H1 company comprehensive gross profit margin of 30.54%, year-on-year increase of 3.23pct / 23Q2 comprehensive gross profit margin of 31.12%, year-on-year growth of 4.25pct, month-on-month growth of 1.25pct, gross profit margin repair is expected to be mainly due to the company's active efforts to reduce costs and increase efficiency and the depreciation of RMB.

In terms of period expenses, the period expense rate of the company in 23H1 is 16.74%, which is an increase of 6.62pct over the same period last year, and the sales / management / R & D / financial expense rate is 2.08%, 7.00%, 9.49% and 1.83%, respectively, and + 0.54/+1.25/+1.69/+3.13pct respectively. Among them, the financial expense rate increased significantly over the same period last year, mainly due to a 66 per cent year-on-year decline in exchange earnings to 39 million yuan. Under the combined influence, 23H1's net interest rate was 12.18%, down 3.21% from the same period last year. 23Q2 net interest rate was 13.87%, down 5.47pct from the same period last year.

Investment suggestion: as a platform enterprise in innovative consumer electronics and Internet of things, the company takes the lead in basic research and UDM system, and has outstanding advantages in intelligent manufacturing services; by continuously increasing R & D investment, improving the innovative layout of industrial control, vehicle regulation, medical and other fields, the product matrix is constantly expanding, and the impact of destocking of engraving machines is weakened, the company is expected to restart steady development and have sufficient momentum in the medium and long term. We estimate that the operating income of Yingqu Technology in 2023-2025 will be 46.58,59.91 and 7.588 billion yuan, up 7.19%, 28.61% and 26.67% over the same period last year. The return net profit is 6.54,9.06 and 1.172 billion yuan, an increase of-5.7%, 38.6% and 29.3% over the same period last year, corresponding to PE of 21.0x, 15.1x and 11.7x, with a 23-year 30xPE and a target price of 25.5 yuan, maintaining the investment rating of Buy-A.

Risk tips: raw material price fluctuation risk; business expansion is not as expected risk; major shareholder reduction risk.