Event: the company achieved operating income of 200 million yuan in the first half of 2023, an increase of 7.5% over the same period last year, in which the orders of the company's products used in the logistics industry gradually recovered, customer demand increased, and the company's sales increased; the net profit of 30 million yuan was realized, an increase of 15.2% over the same period last year; the net profit of non-return was 30 million yuan, an increase of 24.7% over the same period last year.

In the second quarter of 2023, the company achieved revenue of 100 million yuan, an increase of 6.9% over the same period last year, and a net profit of 20 million yuan, an increase of 12% over the same period last year.

The gross profit margin is repaired upward, and the expense rate is better controlled. In the first half of 2023, the company's sales gross profit margin was 32.7%, an increase of 3ppp over the same period last year; the net sales margin was 16.9%, an increase of 1.1pp over the same period last year, mainly because the purchase prices of product materials such as IC chips, IGBT modules and capacitors fell year-on-year, resulting in a reduction in the cost of the company's products over the same period last year. In terms of expenses, the company's sales expense rate / management expense rate (including R & D expenses) / financial expense rate is 5.9%, 10.7%, 0.9%, respectively, compared with the same period last year-0.4pp/+0.5pp/+0.4pp.

The domestic downstream traditional recovery drives the performance to improve, and the overseas market becomes the follow-up increment. With the gradual clearing of 2023Q1 de-inventory phenomenon, the recovery trend of industrial control manufacturers' orders is obvious, the company continues to expand market business, the development trend is better. At present, the company has achieved good process performance in the machine tool, oil field, air compressor and other industries, and the company's development focus has been synchronously adjusted to the client, where the demand determines the business process, resource allocation, etc., benefiting the demand of the core customers. In addition, we believe that under the trend of the gradual increase in the localization rate of industrial control products, domestic investment going to sea is the next development direction of the industry, along with the company's gradual expansion of regional + customer numbers overseas. overseas business is expected to open up new growth space for the company.

Investment in research and development continues to increase to support long-term sustainable development. In the first half of 2023, the company's R & D expenditure rate was 7.3%, an increase of 0.9 ppm over the same period last year, and the number of R & D personnel was 111, an increase of 19.4% over the same period last year. The company is currently in multi-project research, servo: to fill the gap in high-power categories, improve in semiconductors, robots, intelligent cars, metal processing machine tools and other scene applications. Frequency converter: fill the medium power range and improve the product models and technologies used in metallurgical, electric power, petroleum, chemical and other project markets. Energy storage converter: the company's TE series product project has been completed, and the technical verification and production work related to the integration of optical storage, charging and inspection have been completed. PCS/BMS has reached the business level of domestic mainstream manufacturers, and is expected to benefit from downstream demand for high prosperity-driven business volume in the future.

Profit forecast and investment advice. The company's revenue from 2023 to 2025 is expected to be 480 million yuan, 660 million yuan and 890 million yuan respectively, and the year-on-year growth rate of net profit for the next three years is 67.9% 39.8% and 46.1% respectively. The company's product structure is perfect, integrated solutions enhance customer stickiness, "overseas + multi-fields" go hand in hand, promote the company's performance to improve, and maintain the "buy" rating.

Risk hints: the risk of falling product prices due to increased competition; the relatively low risk of high-performance products; the risk of rising raw material prices; and the risk of exchange rate fluctuations affecting overseas business revenue.