Incident: The company released its 2023 semi-annual report. 2023H1 achieved revenue of 130 million yuan, +51.0% year-on-year; realized net profit of 38 million yuan, +49.6% year-on-year. Looking at a single quarter, Q2 achieved revenue of 73 million dollars, +117.1% year on year, and +27.2% month on month; realized net profit of 23 million yuan, +160.9% year on year, and +53.6% month on month.

The inspection and testing business performed strongly, and the measurement business developed steadily, which led to a significant increase in the company's revenue. By business, 2023H1, the company's inspection and testing services achieved revenue of 120 million yuan, +63.8% year-on-year. The main reason is that the holding subsidiary Anhui Yutsu consolidated revenue of 23 million yuan during the reporting period, and the increase in sampling of wires and cables by downstream customers; metering services achieved revenue of 4.51 million yuan, +68.7% year-on-year. Business development and order acceptance were difficult during the same period in '22. Currently, the company's business development and order acceptance have returned to normal; professional technical services have achieved revenue of 1.74 million yuan, -56.2% year-on-year. The decline in business is mainly due to the strong professionalism of the business and fluctuating market demand. It's more sexual.

Overall gross profit margin and net interest rate increased slightly; operating efficiency improved, and the cost ratio declined steadily during the period. At 2023H1, the company's comprehensive gross margin was 63.0%, +1.2pp, and the period cost rate was 22.4%, and -3.2pp. The decline in cost ratio was mainly due to optimization of the company's laboratory management and improvement in operating efficiency. Among them, sales, management, R&D, and financial expense ratios were +0.8 pp, -0.2 pp, -1.5 pp, and -2.2 pp, respectively. Looking at a single quarter, Q2's comprehensive gross margin was 63.8%, +5.2 pp, +1.8 pp; net margin was 35.8%, +9.2 pp, +4.4 pp; period expense ratio was 21.2%, -4.6 pp, and 2.1 pp; among them, sales, management, R&D, and financial expense ratios were +0.9 pp, -2.3 pp, -1.8 pp, and -1.4 pp, respectively.

Actively carry out marketing and cultivate new business directions, and the company's competitiveness continues to improve. The company continues to promote the “two wings in one, radiate the whole country” business layout. 2023H1, China Cable Guangdong achieved revenue of 93,000 yuan and is currently still under project construction; Anhui Yutekai achieved revenue of 23 million yuan and consolidated net profit of 5.9 million yuan, driving a significant increase in the company's profitability; carrying out the construction of an open test site for ultra-high voltage cable pre-inspection in Baoshan, Shanghai, is expected to further increase the production capacity of UHV cable inspection and testing services. The company has stepped up market development efforts and dug deeper into the needs of cable manufacturers and cable users. 2023H1 participated in more than 20 tenders from large enterprises such as China, Shanghai, and the State Grid, with a cumulative bid amount exceeding 10 million yuan. The winning projects include cable product sampling inspection by the Shanghai Municipal Administration of Market Supervision, sampling inspection of cable materials by Shanghai, Hebei, Beijing and other power grid companies in 2023, and long-term performance tests for environmentally friendly 110kv high voltage cables and accessories.

Profit forecasts and investment recommendations. It is estimated that the company's net profit for 2023-2025 will be 110 million, 150 million yuan, and 220 million yuan respectively. The compound growth rate of net profit to parent will be 43% over the next three years, maintaining the “holding” rating.

Risk warning: risk of reputational and brand impact, risk of resource integration, and single risk of main business.