The company achieved rapid growth in revenue and profits in the first half of 2023. The company's revenue in the first half of 2023 was 199 million yuan, an increase of 52.2% over the same period last year; the net profit returned to its mother was 39.93 million yuan, an increase of 33.3% over the same period last year; and the non-net profit was 34.122 million yuan, an increase of 53.3% over the same period last year. Of this total, the revenue in the second quarter was 130 million yuan, an increase of 67.0% over the same period last year, and the net profit of returning home was 28.3 million yuan, an increase of 32.3% over the same period last year.

With the rapid growth of industrial Internet products, the solution business has formed large-scale sales. In terms of different industries, the company's main downstream application areas, smart energy, industrial Internet, intelligent transportation, and smart city, respectively earned 6500, 5705, and 3875 million yuan, of which industrial Internet and intelligent transportation increased by 320.6% and 122.7% respectively compared with the same period last year, benefiting from the accelerated digitization process of China's intelligent manufacturing industry and the rapid growth of the company's industrial Internet business. The company actively developed software supporting solutions to form a breakthrough in large project orders. During the reporting period, the company's solution revenue was 34.09 million yuan, accounting for 17.1% of the company's revenue. In terms of products, switches are still the company's main products, with industrial switching products, industrial gateway products, industrial wireless products and solutions accounting for 69%, 8%, 3%, 17%, respectively.

With the change of revenue structure, the gross profit margin decreased slightly, and the R & D expense rate and sales expense rate were optimized under the scale effect. The company added project revenue from solution products, supporting a full range of software and hardware products, and the overall revenue structure changed with the increase in the category of solutions. During the reporting period, the gross profit margin was 45.4%, down 3.8pct from the same period last year. With the rapid expansion of the company's operating scale, the scale effect superimposed the company to improve operating efficiency, and the R & D expense rate and sales expense rate decreased by about 5pct/7.4pct respectively compared with the same period last year. Management fees increased by 161% year-on-year, mainly due to equity incentives to amortize shares to pay fees, excluding this fee, the company's first-half net profit increased by 50% compared with the same period last year.

The scale of operation is expanded, and the active layout is oriented to smart energy, industrial Internet and intelligent transportation solutions.

In the first half of the year, the company's landing photovoltaic + energy storage digital project provides data monitoring system for Guohe Town 50MW/100MWh Energy Storage Power Station in Xiantao City, Hubei Province; landing intelligent transportation scheme provides high-definition monitoring system for Kunchu highway tunnel in Yunnan Province, vehicle-road collaborative communication network support for Geely Research Institute Smart Road project, and real-time communication perception system for Chengdu Metro. Provide full scene perceptual communication system for Shenmu Zhangjiadong Coal Mine.

Risk tips: new technology research and development is not as expected; upstream raw material supply is in short supply; industry competition is intensified.

Investment suggestion: the company's newly expanded solution business has formed large-scale sales, and the overall business structure and comprehensive gross profit margin have changed. at the same time, taking into account the share payment fees arising from this year's new planned equity incentive, we slightly reduce our profit forecast. It is estimated that the 2023-2025 net profit will be 1.920 million yuan respectively (the previous forecast net profit will be 1.422 billion yuan respectively) The current share price trades at 32-21-15 times PE, maintaining a "buy" rating.