Event: The company released its semi-annual report for 2023. In 2023H1, the company achieved operating income of 572 million yuan, an increase of 0.05% over the previous year; realized net profit of 63.91 million yuan, an increase of 12.86% over the previous year; achieved net profit of 54.57 million yuan, an increase of 20.55% over the previous year.

Profit increased year over year, and profitability gradually recovered. In the first half of 2023, due to the downward cycle in the construction machinery industry and insufficient demand in the domestic market, the company's revenue was basically the same as the same period last year. However, with continued cost reduction and increased efficiency, the company's net profit increased year-on-year, and profitability gradually recovered. The company's 2023H1 gross margin was 26.36%, up 3.23 pct year on year; 2023H1 net margin was 11.16%, up 1.26 pct year on year.

Overseas sales performance is impressive, and the international layout is expected to usher in a period of performance realization. Although there was no significant recovery in downstream demand for construction machinery in the first half of 2023, exports performed well. According to the China Construction Machinery Industry Association, in the first half of 2023, China's construction machinery exports amounted to 19.89 billion US dollars, an increase of 32% over the previous year. The company promotes the process of business internationalization through the layout of localized production, the establishment of a dealer network, overseas adaptive product research, the construction of a global service system, and the construction of a global supply system. The company's 2023H1 overseas sales revenue was 97.8 million yuan, an increase of 44.84% over the previous year. Among them, mobile crushing equipment achieved a breakthrough in overseas sales. Overseas sales orders exceeded 59.06 million yuan, an increase of 308.44% over the previous year, becoming an important growth point for the company's revenue. By the end of June 2023, the company's overseas product sales had entered Central Asia, Southeast Asia, North America, North Africa and other regions.

The product performance of raw aggregate processing equipment is outstanding, and mass production of new products drives business development. The company independently developed functions for automatic wear calibration and automatic discharge port adjustment in mobile crushing equipment. An intelligent electronic control system was used to replace manual calibration and adjustment effects, and the product performance was outstanding. The company's mobile crushing equipment 2023H1 achieved sales revenue of 85.65 million yuan, an increase of 85.89% over the previous year. In the first half of 2023, mass production of electric drive mobile breakers independently developed by the company began. As of June 30, electric drive mobile breakers orders accounted for 20% of all mobile breakers.

In addition, the fuel consumption of the company's latest series of optimized and upgraded oil-driven mobile crushing equipment has been reduced by 30%.

Sales revenue of aggregate recycling processing equipment is growing rapidly and has become a new revenue growth point. The company has independently developed a number of advanced technologies for construction waste recycling equipment, such as intelligent sorting robots and surface mortar peeling of recycled concrete aggregates. By 2023H1, the equipment achieved sales revenue of 27.45 million yuan. Demand for recycling waste asphalt recycling mixtures has increased due to a combination of traffic loads and natural climate factors. The company's orders for asphalt mixture peeling and recycling treatment equipment increased dramatically. The 2023H1 sales contract amount was 27.73 million yuan, an increase of 419.29% over the previous year.

Profit prediction, valuation and rating: The company's profitability is gradually improving, and there is room for development of raw aggregate processing equipment and aggregate resource recycling treatment equipment. We maintain the company's net profit forecast for 2023-2025 at 169 million, 232, and 295 million yuan, and maintain the “increase in holdings” rating.

Risk Alerts: Macroeconomic Fluctuations and Policy Adjustment Risks; Market Competition Risks; Sub-IPO Stock Price Fluctuations Risks; Raw Material Price Fluctuations Risks; Accounts Receivable Repayment Risks.