Events:

According to the company's semi-annual report for 2023, 23H1 achieved revenue of 705 million yuan, + 75.65% year-on-year; net profit of 67 million yuan, + 38.85%; and non-net profit of 58 million yuan, + 61.36% of the same period last year.

Among them, 23Q2 realized revenue of 432 million yuan, year-on-year + 102.27%, month-on-month + 58.40%; realized parent profit of 39 million yuan, year-on-year + 41.62%, month-on-month + 36.40%.

Year-on-year increase in gross profit margin and short-term pressure on net profit margin

The company continues to reduce costs and increase efficiency internally, 23H1 comprehensive gross profit margin of 26.49%, year-on-year + 1.33pct; net profit rate of 9.51%, year-on-year-2.52pct. The decline in net interest rate is mainly due to factors such as corporate management, substantial increase in R & D expenses and amortization of equity incentive expenses. With the rapid development of CNC equipment and power electronics temperature control industry, the company's revenue is expected to continue to grow rapidly.

Rapid expansion of energy storage business to continuously strengthen customer expansion

In the first half of the year, the revenue of the power electronics temperature control business was 372 million yuan, + 352.91% compared with the same period last year, and the gross profit margin was 22.51%, year-on-year-8.06pct. The proportion of the company's liquid-cooled temperature control products has gradually increased, and the revenue in the field of energy storage temperature control has reached 249 million yuan. The company's products benefit from the liquid-cooled temperature control advantages accumulated in the numerical control equipment and power electronics industry, and the cooperative customers include Sunshine Power supply, Kelu Electronics, Nandu Power supply and other well-known enterprises.

With the further improvement of energy storage market demand, the company accelerates technology research and development, product development and customer expansion, and is expected to further increase market share.

Numerical control equipment temperature control steady growth, profitability greatly improved

In the first half of the year, the temperature control business of CNC equipment achieved revenue of 316 million yuan, + 13.06% compared with the same period last year, and gross profit margin of 30.87%, + 7.37pct. According to the forecast of the China Machine tool Industry Association, the machine tool industry is expected to grow by about 5% in 2023. The company has a wide range of product coverage in the field of domestic CNC machine tools and laser equipment temperature control, and its partners include Haitian Seiko, Neptune, Germany Emag Group and so on. We expect that with the continuous expansion of downstream applications, CNC equipment temperature control business market potential is greater, the company's related business is expected to continue to grow steadily.

Earnings forecast, valuation and rating

We estimate that the company's revenue for 23-25 years will be 19.22 billion yuan respectively, the year-on-year growth rate will be 90.79%, 56.68%, 45.25%, 1.93%, 319, 489 million yuan, respectively, and the year-on-year growth rate will be 50.88%, 65.41%, 53.25%, 1.14 CAGR, 1.892.90 yuan / share and 56.39%, respectively. The corresponding PE was as much as in 35-21-14. The company's energy storage temperature control business is growing rapidly and has broad room for long-term growth. With reference to the comparable company's valuation, we give the company 26 times PE in 24 years, with a target price of 49.14 yuan, maintaining a "buy" rating.

Risk hints: large fluctuations in raw material prices; intensified competition in the industry; iteration of liquid cooling technology and new field expansion are not as expected.