Incident: The company released its 2023 semi-annual report. 2023H1 achieved revenue of 1,981 million yuan, +57.53% year-on-year; net profit of 298 million yuan, +30.04%; net profit of 275 million yuan after deducting non-return net profit of 275 million yuan, +25.10% year-on-year. In the second quarter, we achieved revenue of 1,038 million yuan, +60.55% year on year, +9.98% month on month; net profit of 155 million yuan, +27.09% year on year, +7.95% month on month; net profit after deducting non-return net profit of 141 million yuan, +23.00% year on year, +6.06% month on month.

The company's revenue increased 57.53% year on year, and the wind power business increased dramatically. 2023H1, the company's gross profit margin was 26.72%, year-on-year -0.26pct, net interest rate 15.05%, year-on-year -3.18pct. The company's gross profit margin for the second quarter was 27.08%, year-on-year +0.64pct, net interest rate 14.92%, year-on-year -3.92pct. At the core business level, aerospace forging revenue was 679 million yuan, +20.03% year on year. The company participated in the development and trial production of many new models and cooperated with international manufacturers for a long time, and had received some batch production orders; petrochemical forgings had revenue of 490 million, +69.30%, power forgings had revenue of 479 million, +297.04%, and the wind power business in the power sector grew rapidly. The company implemented a “dual carbon” development strategy and undertook national scientific research projects.

Accounts payable indicate a high level of prosperity in the downstream, increasing research and development, as well as on the military and civilian tracks. In terms of expenses, the company's management/R&D/sales/financial expenses were 0.36/0.89/0.30/- 0.1 billion yuan respectively, of which R&D expenses were +69.84% over the same period, and the company continued to increase investment in product development. The company's accounts payable were 585 million dollars, +30.96% from the beginning of the year, due to an increase in procurement payables; contract liabilities of 39 million, +65.06% from the beginning of the year, an increase in advance payments due to orders; inventory of 953 million, raw materials of 489 million, +27.52% from the beginning of the period, and 196 million of inventory goods, +42.38% from the beginning of the period. The company expanded production and stocking, which may indicate strong downstream demand.

Invest in subsidiaries to expand production capacity and target the commercial flight circuit. On May 11, the company invested in the establishment of a wholly-owned subsidiary, Wuxi Paike New Energy Technology Development Co., Ltd., which specializes in forgings, machining and other businesses. At the same time, Wuxi Paixin has already achieved profits, expanded machine processing capacity, and consolidated the company's basic market. In the aerospace field, the company participated in the development of various downstream military models; the company aimed at the field of die forging and laid out the large aircraft industry chain ahead of schedule.

Investment advice: The company's net profit for 23/24/25 is estimated to be 638/7.95/987 million yuan YoY +31.5%/+24.5%/+24.2%. First time rating, a “buy” rating is given.

Risk warning: 1. Fluctuations in raw material prices; 2. Price cuts for downstream customers; 3. Fund-raising projects fall short of expectations.