23H1's net profit was +48.6% year-on-year, maintaining the “buy” rating company 23H1 to achieve revenue of 2.05 billion yuan (yoy +30.1%) and net profit of 0.86 billion yuan (yoy +48.6%); 23Q2's net profit from return to mother was 0.13 billion yuan (yoy -64.2%, qoq -81.8%).

Considering the pressure on the fan tender price, we lowered our product gross margin assumption slightly. We expect the company's EPS to be 1.18/2.18/3.30 yuan (previous value: 1.47/2.54/3.39 yuan) in 23-25, and the average PE (2023E) value for comparable companies (2023E) is 18.3X. Considering that the company has an integrated industrial layout of special steel materials and components, the company was given 24.0X PE in '23, corresponding to a target price of 28.32 yuan (previous value of 35.28 yuan), maintaining the “buy” rating.

23H1 gross margin was +0.56pct year on year, 23Q2 gross margin fell somewhat month-on-month. According to the company's semi-annual report, 23H1's gross profit margin was 16.99% (yoy+0.56pct), mainly due to a decline in the prices of raw materials scrap, pig iron and alloys. The cost rate for the period was 11.65% (yoy-0.3pct), of which the management fee rate was 3.29% (yoy-1.14pct), mainly because the company continued to strengthen internal cost review and control, and the financial expense ratio was 3.20% (yoy+0.46pct), mainly due to increased loan interest expenses and increased bill discounting, and an R&D expense rate of 4.78% (yoy+0.37pct), mainly because the company continued to increase R&D investment. 23Q2 The company's gross profit margin was 14.4% (yoy -3.1%, qoq -6.2%), which declined somewhat from month to month.

The three major sectors developed in an orderly manner. Gearboxes and precision machinery parts projects gradually entered the trial production reporting period. The company's parts products achieved revenue of 1.42 billion yuan, accounting for a further increase to 69.1%, and the product structure gradually stabilized. Looking downstream, the company's revenue from the new energy wind power sector accounted for more than 50%. In the first half of the year, large-scale wind power casting project construction work was completed, and casting production capacity was further increased. At the same time, the core precision parts project for large-scale high-end equipment gradually entered the trial production stage, and some products had already entered the small-batch supply stage; in terms of steel castings, the vast number of new materials companies released their melting capacity and gradually invested in the construction of high-end equipment processing and manufacturing projects; on the military side, the military sector was steadily advancing market development and progress.

In a period of critical opportunities for wind power development, the company's R&D continues to make progress

According to the National Energy Administration, 23H1 added a total of 22.99 GW of wind power installed, an increase of 10.05 GW over the previous year. Of these, 23Q2 added 12.59 GW of wind power installed, which is slightly lower than market expectations. In the short term, the wind power industry needs to face factors such as the cancellation of subsidies and affordable access to wind power. Tender prices for offshore fans may gradually fall, and face the challenge of cost collapse and technological innovation in the industrial chain. The company continued to make progress in research and development. During the reporting period, the company's offshore wind power 14MW wheels were successfully developed and tested in batches; 16.6MW tower connectors and engine cabins for offshore wind power were successfully tested; 6.25MW casting spindles were successfully tested; and 18MW wheels and frames for offshore wind power completed production feasibility verification and were manufactured in molds.

Risk warning: Downstream demand falls short of expectations, raw material prices fluctuate greatly, and production capacity release falls short of expectations.