Event: The company released its 2023 annual report and planned holdings increase+repurchase announcement. 2023H1 had revenue of 476 million yuan, +26.94%; net profit of 87 million yuan, +16.87% of the same period; net profit of non-return net profit of 77 million yuan, +23.92% of the same period. In a single quarter, 2023Q2's revenue was 194 million yuan, -18.54% year on year, -31.05% month on month; net profit of 29 million yuan, -31.69% year on year, -51.10% month on month; net profit of non-return home net profit was 22 million yuan, -45.25% year on year, -59.83% month on month.

Superalloy business: 2023H1 revenue is growing at a high level, and the production capacity of 2023H2 in Shenzhen and Shantou is expected to continue to increase. Benefiting from increased demand in downstream aviation, gas turbines, etc., 2023H1 superalloy revenue was 109 million yuan, +63.65% year-on-year, and gross profit margin was 36.98%, year-on-year -3.43 pct. Gross margin declined or was due to changes in product structure. Shanghai Wanze 2023H1 has revenue of 84 million yuan, +100.62% over the same period. Eight of the 15 new products under development were transferred to batch production, and at the same time, new important customers such as Siemens were developed and delivered. Shenzhen-Shantou Wanze 2023H1 has completed the first phase of production expansion. Currently, it has a production capacity of 100 powder plates per year, 100 tons/year of powder, 60 tons/year of master alloy, 10,000 monocrystalline and directional blades, 40,000 isometric blades, and an annual production capacity of 40,000 pieces of isometric blades, and installation of 250kg argon gas atomization equipment, plasma rotating electrode milling equipment, and powder filling and welding equipment. It is planned that 2023H2 will be put into use. It will greatly increase the production capacity of high-temperature alloy powder and powder trays.

Pharmaceutical business: 2023H1 is growing steadily, and future development can be expected. 2023H1 Pharmaceutical's revenue was 359 million yuan, +20.46%, gross profit margin was 88.50%, +0.45 pct year on year. The core subsidiary, Inner Mongolia Shuangqi, had a net profit of 122 million yuan, or +18.96%. The company's probiotic products had curative effects on intestinal disorders, so orders increased significantly in the first half of the year.

Currently, the company is speeding up the construction of the R&D headquarters and industrialization base in Zhuhai, and the relocation of the Shuangqi plant in Inner Mongolia is also progressing steadily. In the future, it will build a north-south dual base pattern. At the same time, the Meituan Platform and Alibaba Platform flagship stores are expected to be launched by the end of August 2023 to fully open up online business. The pharmaceutical business is expected to usher in steady growth as production capacity is built and channels are expanded.

Driven by the increase in demand for aviation and gas turbines, 2023H1's superalloy revenue has ushered in rapid growth. As production capacity in Shenzhen-Shantou is put into production one after another, superalloys are expected to continue to grow at a high level in the future. At the same time, the pharmaceutical business is expected to usher in steady growth. The announcement of the holding+repurchase plan also shows the company's confidence in future development.

1. Superalloys: Relying on a world-class superalloy team, we have proven our quality and mass production capacity by cutting into domestic manufacturers to cast blades. Currently, precision castings such as blades have been cut into various models such as aviation and gas turbines, and the high growth trend is remarkable. At the same time, due to the asset-heavy nature of precision casting, its scale effect is very obvious. In the future, the scale effect is compounded by an increase in yield, and the profitability of the company's superalloy business is expected to continue to increase.

2. Pharmaceutical business: 2023H1's pharmaceutical business is growing steadily. In the future, as new production capacity is put into operation and channels continue to expand, the pharmaceutical business is expected to maintain steady growth in the long run.

3. Shareholding increase+repurchase plan: 1) On August 26, 2023, the company announced a holdings increase plan. Wanze Group, the controlling shareholder, plans to increase its holdings of the company within 6 months from the date the increase plan was disclosed, with an amount not less than 80 million yuan and no more than 160 million yuan; 2) On August 29, 2023, the company announced a share repurchase plan with no less than 150 million yuan (inclusive) and no more than RMB 300 million (inclusive) to repurchase the company's shares. The repurchase price does not exceed RMB 16 per share (inclusive). The holding+repurchase plan indicates that the company is confident in future development.

Investment advice: Wanze Co., Ltd. is one of the companies with the best growth in the aviation circuit. The shareholding increase+repurchase plan shows the company's confidence in future development. According to the 2023H1 company's performance, we expect the company's net profit to be 202 million yuan, 313 million yuan, and 442 million yuan respectively from 2023 to 2025. The corresponding PE is 33X, 21X, and 15X, maintaining the “buy” rating.

Risk warning: The industrialization process of the company's products fell short of expectations; the expansion of new production capacity fell short of expectations.