Event: according to the company's semi-annual report in 2023, H1 Company realized revenue of 3.345 billion yuan, year-on-year-9.42%, net profit of 194 million yuan, + 5.20% year-on-year, and deducted non-net profit of 145 million yuan,-13.35%. From a quarterly point of view, the company's 2023 Q2 realized revenue of 1.608 billion yuan, year-on-year-9.61%, month-on-month ratio-7.41%; realized home net profit of 48 million yuan, year-on-year-23.13%, month-on-month-66.68%; realized deduction of non-net profit of 31 million yuan, year-on-year-43.70%, month-on-month-72.62%.

The contribution of emerging business has increased, and the level of profitability has improved steadily: due to the impact of the recovery in industry demand, the company's revenue fell slightly compared with the same period last year. However, in 2023, H1, the company continued to maintain its dominant position in the markets such as antenna, wireless charging and EMI/EMC, and made rapid breakthroughs in commercial satellite communications, servers, automotive and Internet of things / smart home, with rapid expansion of business scale, continuous optimization of product structure and improvement of profitability. In 2023, H1 company's gross profit margin is 18.52%, year-on-year-0.34pcts; net profit rate is 5.70%, year-on-year + 0.70pcts. In terms of expenses, the rates of sales, management, R & D and financial expenses of H1 company in 2023 were 0.81%, 3.60%, 8.33%, 0.57%, respectively, with changes in the same period + 0.08/+0.06/-0.19/-0.61pct. Among them, the financial expense rate and absolute value have decreased compared with the same period last year, mainly due to the reduction of exchange losses caused by exchange rate changes.

Continue to strengthen the integrated layout of LCP, consumption + communication + automotive multi-service engine momentum is strong: in 2023, the company continues to maintain the market advantages of antenna, wireless charging, EMI/EMC and other services, and customer development is progressing smoothly. At the same time, it continues to expand new businesses such as high-precision connectors, LCP modules / millimeter wave antennas, UWB, automotive interconnection products, passive components, etc., realizing the leap from a single business to a diversified business of "consumer electronics + satellite communications + smart cars", providing an important growth force for the company's sustainable development and further expansion of its business scale in the future. In terms of high-precision connectors, relying on its own radio frequency technology, magnetic materials and other technical advantages, the company has achieved business breakthroughs in the field of commercial satellite communications, and the business scale has expanded rapidly. LCP and millimeter wave antenna module, the company continues to strengthen the "LCP material-> LCP parts-> LCP module" one-stop capability, independent research and development of LCP film, LCP high-frequency FCCL has passed the United States UL (Underwriter Laboratories Inc.) certification, has served major customers in North America. In terms of automotive interconnection products, the company has increased its customers and business development efforts, and has obtained the supply qualifications of Tesla, Inc., Volkswagen, Dongfeng Honda, Guangzhou Automobile Honda, FAW Red Flag, FAW Pentium, Changan Automobile, Rivian, Mercedes-Benz, Visteon, Foxconn and other domestic and foreign mainframe factories and Tier1, and the corresponding business scale continues to expand. In terms of passive components, the company aims at the high-end positioning of passive components and has successfully developed multi-category and multi-model high-end resistors and MLCC products, among which the electrical performance and reliability of high-end MLCC products have reached the technical level of the same type of MLCC products of their counterparts in Japan and South Korea. In terms of UWB business, the company's products have been applied to intelligent car keys, intelligent door locks, intelligent medical devices, intelligent security, intelligent audio and other Internet of things and smart home products, realizing the company's business expansion in the field of Internet of things / smart home applications.

With the high demand for smart home / automotive appliances, the automotive electrical business is expected to usher in high growth: driven by 5G technology, artificial intelligence and sensor technology, the Internet of things has entered a new round of rapid development. Smart home is a prominent field of rapid development in the Internet of things industry. According to a report released by statista, the global smart home market is expected to grow from $126.1 billion in 2022 to $207.8 billion in 2026. The smart home market in 2022 is expected to grow at a compound annual growth rate of 13.30% in 2026, and the domestic smart home market is expected to reach $45.3 billion by 2026. At present, the company has reached strategic cooperation with NXP, complementary advantages, jointly promote the application of UWB in the field of the Internet of things and the Internet of vehicles, and have accumulated rich experience in scene application. With the continuous development of UWB technology and the continuous growth of the smart home market, the company is expected to take advantage of its leading edge to seize the growth opportunities of emerging business. In addition, the magnificent demeanor of the new energy vehicle industry has also injected new momentum into the company's profit growth. According to the data of the unified invoice for motor vehicle sales, in 2022, the sales volume of new energy vehicles in China reached 5.681 million, the penetration rate of new energy vehicles reached 23.5%, the penetration rate of new energy vehicles reached H1 in 2023, and the sales volume of new energy vehicles in China reached 3.111 million, an increase of 38.3% over the same period last year. The penetration rate of new energy vehicles reached 27.4%. In terms of automotive interconnection business, the company has obtained the supply qualifications of domestic and foreign mainframe factories such as Volkswagen, Dongfeng Honda, Guangzhou Automobile Honda, FAW Red Flag, FAW Pentium, Changan Automobile, Rivian, Mercedes-Benz, Visteon, etc., and is conducting research and development of related products, and conducting business and project contacts with more than a dozen domestic and foreign mainframe factories and Tier1, such as Tesla, ZOOX, BYD, Toyota, Nissan, Changan, Huawei, XIAOMI, Harman, Novem, etc. With the continuous development of the new energy vehicle industry, the company's automotive interconnection business is expected to usher in major development opportunities in the future.

Maintain "buy" rating: the company is the world's leading RF components company, is one of the first to carry out 5G technology research and development. The company pays close attention to the development trend of the industry, on the one hand, extends to the electronic materials and components in the upper reaches of the industrial chain, on the other hand, speeds up the expansion of new industries such as the Internet of things / smart home, commercial satellite communications, intelligent cars, and opens up a new space for the company's development. In 2023, H1, the company will continue to maintain the market advantages of antenna, wireless charging and EMI/EMC business, increase the introduction of customers, increase investment in new application fields such as smart home, commercial satellite communications and intelligent cars, and realize the leap from consumer electronics to "consumer electronics + satellite communications + smart cars" multi-business development stage, providing an important growth force for the company's sustainable development and business scale expansion. We are optimistic that the downstream application market of the company is broad, and the company's traditional business and emerging business are facing greater growth opportunities. It is estimated that the company's net profit from 2023 to 2025 will be 845 million yuan, 1.163 billion yuan and 1.371 billion yuan respectively, EPS is 0.87,1.20,1.42 yuan, and PE is 20x, 14x and 12x respectively.

Risk hints: market competition aggravates risks, downstream demand is lower than expected, customers relatively concentrate risks, and exchange rate fluctuations affect.