Incident: The company released its 2023 semi-annual report. 2023H1 achieved revenue of 1,134 million yuan, a year-on-year increase of 5.9%, and net profit of 119 million yuan, a year-on-year decrease of 17.5%. Among them, in 2023Q2, the company achieved revenue of 618 million yuan, an increase of 8.9% over the previous year, and net profit for the return mother was 107 million yuan, an increase of 12.8% over the previous year.

Q2 revenue reached a record high, with R-pet's share of revenue breaking 10% for the first time. Against the backdrop of pressure on household consumption in Europe and America, the company continued to promote new product development and develop marketing channels. Q2 achieved revenue of 618 million yuan, an increase of 19.5% over the previous month, a record high. By business: (1) the finished product frame business achieved revenue of 538 million yuan, a year-on-year decrease of 5.9%, a year-on-year increase of 2.5 pct; (2) line business revenue of 280 million yuan, a year-on-year increase of 7.7%, gross margin of 30.1%, a year-on-year decrease of 0.27 pct; (3) the particle business achieved revenue of 169 million yuan, a year-on-year decrease of 15.5%, a gross profit margin of 0.4%, a year-on-year decrease of 14.1 pct; (4) PET products achieved revenue of 123 million yuan, a year-on-year increase of over 10%, and gross margin reached 10% At 0.09%, we expect gross margin to improve markedly with the gradual release of PET production capacity; (5) Environmental protection equipment achieved revenue of 115 million yuan, a year-on-year decrease of 25.0%, a year-on-year decrease of 25.0%, and a gross profit margin of 58.0%, an increase of 3.2 pct.

Production capacity at the Southeast Asian base is gradually being released, and recycled PET drives long-term growth. 2023H1, the company's Vietnam Yingke Thanh Hwa (Phase I) finished product frame project achieved revenue of 71.7075 million yuan and net profit of 13.254 million yuan; Malaysia's 50,000 tons/year PET recycling project focused on building a bottle brick recycling system, lean improvement in manufacturing processes, and global marketing channel development. Product sales were mainly in North America and Europe, and had achieved cumulative revenue of 123 million yuan in the first half of the year. The company currently has a recycled PS production capacity of about 100,000 tons/year. It has put into production 50,000 tons/year and is building a recycled PET production capacity of 100,000 tons/year. The long-term plan is to expand the recycled PS production capacity to 300,000 tons, and the recycled PET production capacity to 1 million tons. The performance is expected to maintain steady growth.

Investment recommendations and valuations: The company's revenue for 2023-2025 is expected to be $2,452 billion, $3,024 million, and $3,591 million respectively, with growth rates of 19.2%, 23.3% and 18.8% respectively, and net profit attributable to the parent being 272 million yuan, 367 million yuan, and 443 million yuan respectively. The growth rates are 17.9%, 34.8%, and 20.9% respectively, maintaining the “increase holdings” investment rating.

Risk warning: the risk that overseas sales revenue is relatively high, the risk that project construction falls short of expectations, the risk of multinational supply of raw materials, etc.