The company released the 2023 semi-annual report. In the first half of 2023, the company achieved revenue of 945 million yuan (+227.85%), net profit of 61 million yuan (+45.88%), net profit of non-attributable income of 52 million yuan (+39%). The company's performance is in line with expectations, and the main sawing business is growing steadily. In addition to optical storage, the subsidiary Yada's business has newly entered site energy, data center power, and other special power supplies, creating a diversified growth curve.

Sawing business: Optimizing the product structure & leveraging Mettson synergies, sawing has maintained steady growth. In the first half of this year, the company's sawing achieved revenue of 322 million yuan, an increase of 11.80% over the previous year, and a gross profit margin of 41.60%, +3.59 pct. In September of last year, the company wholly acquired Metson, leveraging resource integration and industrial collaboration. In the first half of this year, Metson achieved revenue of 47.3535 million yuan, an increase of 40.53% over the previous year. At the same time, the company is developing high-end products. In the first half of this year, sales revenue of high-end products was 164 million yuan, up 16.22% year on year, accounting for 51.03%, accounting for 1.94 pct; among them, tungsten carbide band saw blade revenue was 43.016,800 yuan, up 43.49% year on year, accounting for 13.34%, accounting for an increase of 2.95 pct; broadband saw blade revenue was 578.939 million yuan, up 45.24% year on year, accounting for a year-on-year increase of 4.13pct. In addition, the company is actively expanding overseas markets. In the first half of 2023, export revenue was 94.616,800 yuan, an increase of 15.59% over the previous year, accounting for 29.35%, and an increase of 0.96 pct. The company's sawing business had the highest market share in China and the top three in the world in 2021. The sales volume of the company's bimetallic band saw blades accounted for about 25% of the domestic market in 2021, and the share of leading markets in mature markets such as Europe and the US was over 50%. It is expected that the company will still have a lot of room for growth in the future.

Subsidiary company Yada: Optical storage from 0 to 1, while increasing site energy, data center power, and other special power supplies.

Established in Hong Kong in 1971, Yada has a 50+ year brand history. It is once a wholly-owned subsidiary of Emerson (Emerson), a global power industry leader. It is the top manufacturing platform for domestic power supplies. Its customers are widely distributed in consumer electronics, semiconductor equipment, communications, manufacturing, server centers and medical fields. It has deep technical reserves and product production capacity. Its main customers include Huawei, Apple, HP, and American Advanced Energy.

1) Consumer electronics power supply: At the bottom of the consumer electronics cycle, phased pressure. In the first half of 2023, the company's consumer electronics power business achieved revenue of 472 million yuan, a year-on-year decrease of 30.46%, and gross margin of 3.83%. Demand in the consumer electronics market was weak in the first half of this year, and industry inventory levels continued to be high. The company is based on a major customer strategy. As the bottom of the consumer electronics cycle recovers, major customers launch new products, and end inventory clean-up, the company is expected to gradually recover in the second half of the year.

2) New energy power supply: From 0 to 1, optical storage is expected to achieve explosive growth. At the same time, the company is increasing site energy, data center power, and other special power supplies, so there is huge room for growth. In the first half of 2023, the company's new energy power supply and other power supply businesses achieved revenue of 151 million yuan, a gross profit margin of 13.85%, and achieved a new breakthrough in strategic business revenue. Part of the company's photovoltaic inverter+photovoltaic optimizer+energy storage PCS production line has begun production, with an additional fixed asset investment of 40 million yuan and an additional employee of about 260 people. Based on customer order requirements, the company will continue to increase its fixed asset investment and personnel recruitment for the production line. In addition to the optical storage business, the company has increased the layout of products such as data center power supplies and site energy power supplies to create new growth poles, and is expected to become a leading power platform enterprise in China in the future. The company is still in the initial investment period from 0 to 1, requiring more investment of expenses and increased depreciation and amortization of fixed assets, so profitability has been under pressure for a short time. The company will push production capacity to rise and improve efficiency as soon as possible in the second half of the year. In the future, as the company's production capacity is released in an orderly manner and orders are delivered one after another, the profit situation will continue to improve.

Investment suggestions: We expect the company to achieve net profit of 180, 280 million yuan, and 380 million yuan in 2023-2025, an increase of 40%, 55%, and 33% over the previous year. The corresponding PE is 20.8X, 13.4X, and 10.1X. The company's main sawing business is growing steadily. The optical storage business has grown from 0 to 1. At the same time, it has newly entered site energy, data center power, and other special power supplies. It is expected to build a leading domestic power platform enterprise and maintain its “buy” rating.

Risk warning: Downstream market demand for sawing business falls short of expectations, and expansion of new energy business falls short of expectations.