Strong growth in the first half of the year and abundant orders-on-hand

The company's 2023H1 revenue was 771 million yuan, an increase of 48.6%, a net profit of 91 million yuan, an increase of 55.9%, of which Q2 revenue was 383 million yuan, an increase of 53.4%, and a net profit of 45 million yuan, an increase of 86.0%. The company is the domestic leader in domestic replacement of nuclear fuel transport containers, with abundant orders and normalization of mass production of new fuel transport containers during the reporting period, which is expected to continue to benefit from nuclear power approval acceleration, spent fuel reprocessing construction and independent control of the nuclear industry.

We maintain our previous profit forecast that the company's return net profit for 2023-2025 is expected to be 1.86 million yuan ($272 million). The current share price is 9.9 times PE's 13.1 pound, maintaining a "buy" rating.

Economies of scale increase, profit margins remain high

The company's gross profit margin of H1 in 2023 was 22.65%, down 1.22pct from the same period last year; the net profit rate was 11.74%, which increased 0.63pct over the same period last year. The slight decrease in gross margin was due to an increase in orders requiring higher value of materials. The sales rate / management rate / financial rate / R & D rate of H1 in 2023 is 1.34%, 3.74%, 0.31%, 2.45%, respectively, compared with the same period last year, and the decrease in management rate is due to the enhanced scale effect. We believe that the barriers to nuclear power products such as new fuel transport containers are high, and after the normalization of mass production, the proportion of high-profit products such as nuclear power may continue to rise. After the completion of the fund-raising project, the company will break the shackles of production capacity, economies of scale is expected to be further enhanced, profitability may remain high.

The business of the fourth-generation nuclear power high-temperature gas-cooled reactor has been continuously promoted, and the high-temperature gas-cooled reactor business of the Chemical downstream Prosperity continuous Company has been continuously promoted, which has supplied the hot gas conduit and the main helium fan cooler for the demonstration project of Shandong Shidao Bay High temperature Gas-cooled reactor Nuclear Power Plant, and signed the key equipment contract for the CX project of the High-temperature Gas-cooled reactor. The prosperity of chemical industry and petroleum refining continues: the company's natural gas chemical high-pressure core equipment is exported through major projects of international engineering companies, which is a substantial increase compared with the same period last year; customers in the petrochemical field are sticky, and old customers have high recognition of the company's technology and continuous service capability. Continue to participate in major projects in traditional areas such as coal chemical industry, and actively participate in the manufacture of key equipment for major projects such as efficient hydrogen production from low-rank coal and concentrated urea-based compound fertilizer, so as to achieve the successful delivery of the first large-scale coal gasification core equipment gasifier. The company is expected to continue to benefit from the promotion of the fourth generation nuclear power units and the downstream boom of the chemical industry.

Risk hint: the progress of nuclear power unit start-up is not as expected; the domestic replacement of new fuel and spent fuel transport containers is not as expected; the company's order delivery and production capacity growth is not as expected.