Event: In the first half of '03, the company achieved operating income of 640 million yuan, an increase of 32.02% over the previous year; realized net profit of 78 million yuan, an increase of 39.32% over the previous year; achieved net profit of 73 million yuan after deducting non-return net profit of 73 million yuan, an increase of 53.87% over the previous year. 23Q2 achieved revenue of 426 million yuan in a single quarter, an increase of 25.16% over the previous year; net profit to parent was 58 million yuan, an increase of 48.11% over the previous year, and performance exceeded expectations.

Benefiting from the high boom in the optical storage industry, revenue increased year-on-year. The year-on-year increase in revenue in the first half of the year was mainly due to an increase in sales revenue for motor drives, power quality monitoring and management during the reporting period compared to the same period last year. The downstream of the company's power quality monitoring and control is mainly wind power and photovoltaics. In the first half of this year, China added 78.42 GW of PV installed capacity, up 153.95% year on year, of which 37.46 GW of terrestrial power plants was installed, up 233.72% year on year; 22.99 GW of wind power installed were added, up 77.67% year on year. In terms of energy storage, according to CNESA data, 8 GW/18.2 GWh of energy storage was added in the first half of the year, which has already exceeded the additional installed capacity for the whole of 2022.

Benefiting from the boom in the downstream wind power, photovoltaics, and energy storage industries, the company's revenue side maintained rapid growth. Looking at the breakdown, revenue from power quality monitoring and control (SVG) was 308 million yuan, up 34.62% year on year; motor drive and control revenue was 159 million yuan, up 33.17% year on year; and energy storage system revenue was 104 million yuan, up 53.05% year on year.

Gross margin increased sharply year over year, and there were plenty of orders on hand. 23H1's comprehensive gross profit margin was 29.76%, an increase of 2.51 pct over the previous year. 23Q2's comprehensive gross profit margin was 29.46%, an increase of 3.92 pct over the previous year. The company's PCS export sales strategy has made actual progress, the PCS energy storage product obtained the type test report of the Chinese Academy of Electrical Sciences, and in March, the first self-developed energy storage PCS product was connected to the network and put into operation on site in Guigang, Guangxi. The high-voltage SVG product has completed the design of cost-effective iterative models for high-power and low-power models, respectively. Profitability is expected to continue to increase in the future. As of the end of 2023Q2, the company's contract debt was 118 million yuan, an increase of 99.68% over the same period last year, indicating that the company has sufficient orders on hand.

Backed by Shandong Energy Group, the coal mine intelligent control equipment business advantages are outstanding. Yankuang Energy's second set of emergency power products for coal mines was successfully connected to the grid and operated at the Nantun coal mine on January 10, providing strong support for stable electricity consumption and high-quality development in the mining area. The first 1140V coal shearer long-distance power supply project was put into operation at the Great Wall Minmetals, and the operation results were good. The 23H1 coal mine intelligent equipment business achieved revenue of 25 million yuan, a sharp increase of 258.14% over the previous year. The company is backed by Shandong Energy Group, and the coal mine intelligent control equipment business is expected to become the company's highly profitable and characteristic business.

Profit forecasts and investment recommendations. The company's 23Q2 revenue and profitability were better than expected. As PCS's export sales strategy progresses, new SVG products are reduced and iterated, and profitability is expected to continue to improve. It is estimated that the company's net profit for 23-25 years will be 2.0, 280 million, and 34 million yuan, respectively, and the corresponding PE will be 18, 14, and 11 times, respectively, maintaining the “buy” rating.

Risk warning: Order growth may fall short of expectations, risk of rising raw material prices, and increased risk of industry competition.