Event: the company released its 2023 semi-annual report, the company's main revenue was 1.113 billion yuan, down 19.53% from the same period last year, and the net profit returned to its mother was 24.4923 million yuan, down 24.14% from the same period last year. Of this total, the main income of 2023Q2 was 656 million yuan, down 22.02% from the same period last year, and the net profit of returning home was 14.32 million yuan, down 10.63% from the same period last year.

1. The progress of project construction affects the performance in the first half of 2023, and the improvement in profitability is worthy of attention. Due to factors such as the overall economic environment and delays in the start of individual projects in the first half of 2023, the progress of project delivery and acceptance is affected to a certain extent, resulting in a decline in operating income and net profit level compared with the same period last year.

Of this total, revenue from intelligent agricultural water projects reached 623 million yuan, up 1.25% from the same period last year; revenue from sales and services of agricultural water science and technology products reached 279 million yuan, down 42% from the same period last year; and revenue from information business in agricultural water design and operation reached 205 million yuan, down 27% from the same period last year. In terms of gross profit margin, the gross profit margin of the intelligent agricultural water project reached 21.56%, slightly lower than that of the same period last year; the gross profit margin of agricultural water science and technology products sales and services reached 23.89%, an increase of 0.7 pct over the same period last year; and the gross profit margin of agricultural water design and operation informationization increased significantly, reaching 35.82%, an increase of 4.75pct. In the early stage of its development, the company mainly focuses on the manufacture of material products, and about 1Comp3 is the manufacturing staff. With the upgrading of the business format, the company's personnel structure has been fundamentally optimized, and the overall quality of human resources has been effectively improved, mainly by all kinds of professionals such as design, information and project managers, while the manufacturing staff has been greatly reduced to less than 1x10. We believe that with the continuous expansion of the company's design and operation business with high gross profit margin, the company's overall profitability is expected to continue to improve.

2. Newly signed orders are growing rapidly! Huitu science and technology information business orders increased 56% year on year in the first half of 2023, the company signed new orders of 2.936 billion yuan, an increase of 20.86% over the same period last year; as of August 23, 2023, the company signed new orders of 4.55 billion yuan, an increase of 70.79% over the same period last year! China's water conservancy industry is in the process of rapid development. In the first half of 2023, the country has completed 525.4 billion yuan in water conservancy construction, an increase of 18.1 percent over the same period last year. National and key regional water networks, modern irrigation areas and digital twin water conservancy will become clear key investment directions in the field of water conservancy. The company deeply ploughs the field of agricultural water conservancy and has the advantage of the whole industry chain. as of August 23, 2023, the company's newly signed orders accounted for 72.74% of orders above 50 million yuan, accounting for 72.74% of orders below 5 million yuan (compared with the semi-annual report of 2022, orders over 50 million yuan accounted for 63% and orders below 5 million yuan accounted for 11%), and the company's large orders accounted for an increase in the proportion! The company has made breakthroughs to varying degrees in digital twin basins, water network engineering, digital irrigation areas, flood and drought disaster prevention, etc. as of August 23, 2023, the company's Huitu Technology has obtained information business orders of 315 million yuan, an increase of 56% over the same period last year. We believe that the company has a leading advantage and strong position in the domestic water-saving irrigation industry, the country continues to attach importance to the long-term promotion of high-standard farmland construction under the background of food security, and the industry continues to expand, the company is expected to benefit from industry expansion in a leading position.

Profit forecast: we expect the company's operating income in 2023-25 to be 46.92,60.91 and 7.508 billion yuan, up 37.97%, 29.81% and 23.27% over the same period last year, and the net profit of returning home is 1.59,2.30 and 274 million yuan, up 63.63%, 45.01% and 19.02% over the same period last year. We believe that the company's agricultural and water industry continues to expand, the company should actively expand its scale and scientific and technological research and development, have sufficient savings for on-hand orders, continue to lead in comprehensive competitiveness, and maintain a "buy" rating.

Risk tips: market competition risk; accounts receivable management risk; project delivery risk; management risk of the company's rapid development