Incidents:

The company released its semi-annual report on August 27, 2023. The company achieved revenue of 491 million yuan in the first half of the year, or 10.94% year-on-year. Net profit for the return mother was 195 million yuan, an increase of 0.67% over the previous year, and basic earnings per share were 1.12 yuan.

Revenue has been growing steadily, and gross margin has increased

During the reporting period, due to the increase in production capacity, product delivery and inspection scale, the company's revenue increased 10.94% year on year; product gross profit margin was 53.67%, up 4.84pct from 48.83% in the same period last year. Affected by the company's implementation of equity incentives in October 2022, stock payments of 26 million yuan were generated during the reporting period; due to the increase in sales revenue, the ratio of bill repayments in sales repayments was higher than in the same period of the previous year, resulting in accrued credit impairment losses of 23 million yuan over the same period of the previous year. Affected by factors such as equity amortization, credit impairment loss accrual, and declining cash management benefits, the company's net interest rate fell 4.06 pct compared to the same period last year.

Inventories continue to grow

At the end of the reporting period, the company's inventory was 1,885 million yuan, an increase of 36.47% from 1,381 billion yuan at the beginning of the period. Among them, goods issued 904 million yuan, an increase of 263 million yuan from the beginning of the period, an increase of 41.14% over the previous year; 437 million yuan for raw materials, an increase of 14.48% from 382 million yuan at the beginning of the period; and 109 million yuan for inventory goods, a significant increase of 05 million yuan from the beginning of the period. The rapid increase in issued products and inventory products indicates that the company's future supply capacity is highly guaranteed.

Profit Forecasts, Valuations, and Ratings

We expect the company's operating income for 2023-2025 to be 11.60/13.92/1,669 billion yuan, corresponding growth rates of 34.86%/19.94%/19.95%, net profit of 366/440/528 million yuan, corresponding growth rate of 32.01%/20.16%/20.04%, EPS 2.10/2.52/3.03 yuan/share, and 3-year CAGR of 23.94%. Referring to comparable companies, the company was given 35 times PE in 2023, with a target market value of 12.809 billion yuan, corresponding stock price of 73.51 yuan, and maintained a “buy” rating.

Risk warning:

The industry falls short of expected risk; product type is at risk alone; order delivery falls short of expected risk.