Introduction to this report:

The company's general automation business has maintained steady growth, and the high growth rate of CNC machine tools is expected to continue. At the same time, the company is expanding traditional systems and inverter projects, and its performance is expected to continue to grow.

Key points of investment:

Maintain ratings to increase holdings. The company's 2023H1 performance was slightly lower than expected. Considering that product price reductions and gross margin pressure in the company's main downstream new energy industry are under pressure, the 2023-2025 EPS were lowered to 0.92/1.22/1.51 yuan (originally 1.20/1.62/2.11 yuan), considering that the company's self-made chips and encoders have cost advantages, giving the company 49 times PE slightly higher than the industry average in 2023, corresponding to a target price of 45.08 yuan, maintaining the growth rating.

Incident: The company released its semi-annual report for 2023. In the first half of 2023, it achieved revenue of 602 million yuan (+28.89%) and net profit of 50 million yuan (YoY -11.65%). Performance was slightly lower than expected. Mainly due to low product prices in the new energy industry affecting gross profit margin, while at the same time increasing market and R&D investment to seize market opportunities, net interest rate decreased; in the single second quarter, it achieved revenue of 326 million yuan (+18.18% year on year), achieving net profit of 29 million yuan (YoY).

General automation is growing steadily, and the number of CNC machine tools continues to increase. By product, 2023H1 general automation products achieved revenue of 551 million yuan (+23.20% year-on-year), and the company's servo product layout is becoming more and more perfect, and is widely used in photovoltaics, lithium batteries, 3C electronics and other fields. As the company strengthens sales channel construction, general automation products are expected to maintain steady growth; CNC machine tools have achieved revenue of 44 million yuan (+521.25% year-on-year), and the business is expected to continue at a high growth rate during the development period.

The company has raised funds to expand precision drives and inverters, and the performance is expected to continue to grow. The company plans to issue convertible bonds to raise no more than 750 million yuan to build “R&D and industrialization projects for high-efficiency industrial transmission systems and precision transmission components” and “R&D and industrialization projects for micro photovoltaic (energy storage) inverters”. The release of production capacity is expected to lead to performance growth.

Risk warning: The implementation progress of fund-raising projects falls short of expectations; downstream demand falls short of expectations.