Incident Overview

The company released its semi-annual report for 2023:

23H1: Operating income reached 904 million yuan (YOY +34%), net profit to parent reached 167 million yuan (YOY +68%), net profit after deducting non-return net profit of 162 million yuan (YOY +71%).

23Q2: Operating income reached 542 million yuan (YOY +30%), net profit from attribution reached 107 million yuan (YOY +47%), net profit after deducting non-return net profit of 104 million yuan (YOY +47%).

Analytical judgment:

Revenue: Increased shielded pumps, outstanding performance of liquid-cooled pumps

According to the company's semi-annual report, by business:

(1) Civilian pumps: Affected by the recovery of domestic sales business, the main pump products in the H1 sector achieved sales revenue of about 305 million yuan in '23, 11% over the same period last year.

(2) Household shielded pumps: The sales structure of the company's household sector continues to be optimized. In '23, the H1 series of major pump products achieved sales revenue of about 390 million yuan, an increase of 64% over the previous year.

Looking at key product types, the company sold more than 750,000 units of energy-saving pumps of various types, an increase of nearly 200% over the previous year; according to application scenarios, from January to July 2023, the number of products sold in the heat pump supporting field was about 155,000 units, with a year-on-year growth rate of over 50%, and related products maintained a strong development trend.

Benefiting from the recovery in domestic market demand for traditional wall-mounted stoves, the gradual increase in the company's energy-saving products overseas market share, and the company's rich and mature product reserves, the company has achieved remarkable results in developing new markets.

(3) Industrial pumps: With the support of the company's technology and product reserves, H1 achieved sales revenue of about 130 million yuan in '23, 47% over the same caliber, with a growth rate of over 50% in the chemical sector.

(4) Liquid-cooled pumps: The company's products in this segment are mainly used in the field of liquid cooling temperature control. Downstream application scenarios include new energy vehicles, wind power, energy storage, data rooms, etc. In '23, the H1 sector achieved a total sales revenue of about 200 million yuan, with a growth rate of over 80% under the same caliber. Currently, the company's related fields are still in the early stages of development. Looking at the hydrogen fuel cell liquid cooling sector with obvious advantages, in January to June 2023, production and sales of hydrogen fuel cell vehicles were 1987 and 1,845, respectively, with a year-on-year increase of 78.9% and 85.4%, respectively, with a relatively rapid growth rate.

Profitability: Profitability has steadily increased

(1) H1 gross/net interest rate: The company's gross margin was 33.1% (YOY+5.7 pct), the company's gross profit margin was 18.5% (YOY+3.8 pct), and the non-net interest rate was 17.9% (YOY+3.9 pct) after deducting the non-net interest rate.

(2) Q2 gross/net interest rate: The company achieved gross margin of 33.2% (YOY+4.3pct), the company's gross profit margin achieved 19.7% (yoY+2.3pct), and 19.2% after deducting non-net interest rate (YoY+2.2pct).

(3) Fee rate:

H1: Sales, management, R&D, and financial expense rates were 4.4%, 5.4%, and -1.7%, respectively, +1.2, -0.4, +0.7, +0.2 pct; Q2: Sales, management, R&D, and finance cost rates were 4.5%, 5.2%, 3.7%, and -3%, respectively, and +1.3, +0.4, +0.6, +0.6, -0.1 pct; according to the company's semi-annual report, sales expenses were mainly increased due to business development. The change in R&D expenses is mainly due to increased R&D efforts in the current period.

Investment advice

Considering the company's impressive performance of shielded pumps in the first half of the year, we raised our profit forecast. We expect the company's revenue for 23-25 to be 20.7/25.0/2.96 billion yuan (previous values were 20.6, 24.9, 29.4), +24%/+21%/+18%, respectively. The estimated net profit for 23-25 to be 3.4/4.3/5.3 billion yuan (previous value was 3.2/4.1/5.1), +31%/+27%/+23%, and the corresponding EPS was 2.05/2.59/ 3.19 yuan, calculated at the closing price of 26.26 yuan on August 31, 23. The corresponding PE was 13/10/8 times, respectively, maintaining the “increase in holdings” rating.

Risk warning

Increased competition in the industry, fluctuations in raw material prices, falling short of expectations in order acquisition, political and policy risks in product export destinations, deviations in industry space estimates, risk of third-party data distortion, risk of third party data distortion, risk of information delays or untimely updates on public information used in research reports, failure to pass customer certification, exchange rate fluctuations, etc.