Net profit for the first half of 2023 was +55.2%, maintaining the “increase in holdings” rating. In the first half of 2023, the company achieved total operating income of 1,437 billion yuan, +41.2%; net profit of 62 million yuan, +55.2%; net profit of non-attributable net profit of 60 million yuan, +74.4% year-on-year; of these, Q2 achieved operating income of 779 million yuan, +20.5% year-on-year; net profit of 53 million yuan, +54.5% year-on-year; net profit of non-attributable net profit of 0.52 billion yuan, +51.5% year-on-year. . We expect the company's net profit for 2023-2025 to be 2.22/3.25/410 million yuan, respectively, +57.8%/+46.2%/+26.1% year-on-year, corresponding to 23-25 PE, 36/25/20 times, respectively. Comparable companies such as Wind unanimously expected 23PE to be 30 times the average. Considering that the company has plenty of orders in hand and that the dilemma reversal logic is being further implemented, 40xPE was given, corresponding to a target price of 5.20 yuan (previous value: 4.94) yuan, maintaining the “increase in holdings” rating.

Profitability continued to rise. Q2 gross margin for a single quarter was +6.8 pp. In the first half of 2023, the company achieved a comprehensive gross profit margin of 12.7%, +5.0 pp; in the 2023Q2 single quarter, the company achieved a comprehensive gross profit margin of 15.4%, +6.8 pp year on year, and the company's profitability continued to increase.

Looking at period expenses, the company's total period cost rate for the first half of the year was 8.2%, +1.3 pp over the previous year. The sales expense rate for the first half of the year was 0.5%, -0.1 pp; the management expense rate was 6.4%, +0.7 pp, mainly due to increased employee shareholding plan costs, and management expenses for acquisitions and newly established companies; the financial expense ratio was -0.8%, +1.5 pp, mainly due to fluctuations in the foreign exchange rate; and the R&D expense rate was 2.1%, -0.8 pp from the previous year.

Continuously improving efficiency and business development blossomed more and more. In the first half of 2023, the company continued to improve efficiency and business development blossomed more. The marine engineering EPC business achieved an output value of 1,243 billion yuan, +60% year-on-year, accounting for 87%, and gross profit +3.9 pp; the defense equipment business continued to invest in R&D in special boats and underwater security products, with revenue of +114%; the revenue and gross profit of the nautical engineering technology service business increased 59% and 5.27pp, respectively. In terms of orders, the company's design business received 44 new orders and 134 ships on hand; the supervision business received 12 new orders and 60 ships in hand; the construction business received 50 new orders and 91 ships on hand.

There are plenty of orders on hand, and the logic of reversing the difficult situation is being further realized. Companies that maintain the “increase in holdings” rating are leading R&D leaders in private shipping and offshore engineering manufacturing, and their competitiveness continues under integration. We expect net profit to be 2.22/3.25/410 million yuan, respectively, from 2023-2025, +57.8%/+46.2%/+26.1%. Comparable companies, Wind, unanimously expected an average PE value of 30 times in '23.

Considering that the company has plenty of orders in hand and that the dilemma reversal logic is being further implemented, 40xPE was given, corresponding to a target price of 5.20 yuan (previous value: 4.94) yuan, maintaining the “increase in holdings” rating.

Risk warning: risk of fluctuations in raw material prices; risk of exchange rate fluctuations.