Incident: The company released its 2023 interim report. In the first half of the year, it achieved revenue of 310 million yuan, an increase of 15.2% over the previous year; it achieved net profit of 10.85 million yuan, an increase of 72.2% over the previous year.

Revenue continued to grow, and business scale expansion led to performance growth. In the first half of 2023, the company's revenue was 310 million yuan, an increase of 15.2% over the previous year. The company increased its market development efforts, especially sales of leak detection instruments; it achieved net profit of 0.1 billion yuan, an increase of 72.2% over the previous year. Net cash flow from operating activities was $0.4 billion, which turned negative to positive compared to the same period last year.

Revenue from environmental monitoring instruments and leak detection instruments is the main source of revenue, and the three major product lines are developing steadily. 1) Environmental protection industry policies have empowered the environmental monitoring instrument market, and demand has increased significantly. In the first half of 2023, the company's smart environmental protection cloud platform is in the customer use stage in its research project. In the future, it can open up channels for environmental monitoring and supervision, make a breakthrough in the field of precise management of the atmospheric environment, and is expected to achieve performance growth. 2) The development of the new energy industry has brought a steady increase in the company's revenue for leak detection products. In the first half of 2023, the company's new energy lithium battery sealing intelligent inspection equipment was recognized as the first major technical equipment set in Anhui Province. Driven by the expansion of demand in the new energy market and the continuous increase in sales volume of new energy vehicles, the market prospects for leak detection instruments are broad. 3) Deeply involved in the field of laboratory analytical instruments, product development advantages are outstanding. In November 2022, the company invested in the establishment of Anhui Nuopu New Material Technology Co., Ltd., a wholly-owned subsidiary, focusing on the R&D and production of laboratory chromatography consumables. It combines the company's technology and brand advantages over the past 20 years to further promote the development of laboratory instrument business.

R&D investment continues to grow, creating core technical advantages. Since 2018, the company's R&D investment has continued to grow. 2023H1 has invested 70 million yuan in R&D, and the R&D investment intensity has reached a new high in recent years, at 24.0%. The company's core technology comes from independent research and development. 2023H1 added 7 new domestic invention patents/utility model patents/software copyright/design patent applications, 7 items/6 items/1, and obtained a total of 60 applications/107 items/106 items/41. There are sufficient research projects, and the expansion of the product line has been accelerated. As of 2023H1, the company is developing 20 projects, covering environmental monitoring technology, leak detection technology, and laboratory analytical instrument product systems based on spectroscopy and mass spectrometry principles.

Profit forecasts and investment recommendations. It is estimated that the company's net profit for 23-25 will be 1.1/1.5/210 million yuan, corresponding to the 23-25 EPS of 0.80/1.13/1.59 yuan respectively; the company will be given 22 times PE in 2024, corresponding to the target price of 24.86 yuan, covering the “buy” rating for the first time.

Risk warning: Risks such as increased competition in the industry, project development falling short of expectations, and government subsidies falling short of expectations.