In the first half of 2023, the company realized a net profit of 281 million yuan, which was + 49.55% compared with the same period last year. Benefiting from the high prosperity of the polymer materials industry and the accelerated pace of the company's capacity expansion, the company's order volume increased significantly in the first half of the year compared with the same period last year, and the polymer business and wire and cable business achieved rapid growth. The new energy sector has also gradually reduced losses with the improvement of operational efficiency and management efficiency. At the same time, the implementation of the equity incentive plan and the fixed increase project will inject new impetus into the company's long-term development and improve the company's sustainable development ability on the basis of enhancing team cohesion. We maintain the company's annual homing net profit forecast of 568 / 7.71 billion yuan in 2023-24-25, corresponding to the EPS forecast of 0.55 billion yuan and 0.74 billion yuan. With reference to the comparable company's valuation level, we give the company 2023 cable and polymer business 20xPE, new energy business 3xPS, maintain the target price of 14 yuan, maintain the "buy" rating.

2023H1's homing net profit exceeded expectations by + 49.55% compared with the same period last year. In the first half of 2023, the company realized operating income of 7.239 billion yuan, + 1.22% year-on-year; net profit of 281 million yuan, + 49.55%; and non-return net profit of 217 million yuan, + 34.63% of the same period last year. Among them, the company's 2023Q2 realized revenue of 4.164 billion yuan in a single quarter, + 3.48% year-on-year, + 35.39% month-on-month; realized net profit of 190 million yuan, + 28.55%, + 106.91%; and deducted non-return net profit of 167 million yuan, + 25.43% year-on-year, and + 231.37%. In the context of the high prosperity of the polymer materials industry, the continuous landing of new production capacity and the improvement of capacity utilization have contributed to a substantial increase in the number of orders issued in the first half of the year compared with the same period last year, and the operating performance has achieved rapid growth.

Both the cost side and the price side are good, and the company's profitability continues to improve. In the first half of 2023, the company's overall gross profit margin was 13.88%, up 1.02pcts from the same period last year; the net profit margin was 3.93%, up 1.29pcts from the same period last year. Among them, 2023Q2 single-quarter gross profit margin is 13.96%, year-on-year / month-on-month increase of 0.80pcts0.19pcts; net interest rate of 4.61%, year-on-year / month-on-month increase of 0.93pcts/1.59pcts. Benefiting from the strong support of the strong demand for products downstream of wires and cables, the prices of raw materials copper and polyethylene fell in the first half of the year, and the profitability of the company's products was enhanced under the double benefits of cost and price. At the same time, the company in-depth implementation of target cost management, refined operation of new energy business, the overall operational efficiency and management efficiency has been improved, new energy charging pile sales performance steady growth, gradually achieve loss reduction.

The implementation of equity incentive plan is conducive to enhance team cohesion. According to the company's "2023 restricted Stock incentive Plan (draft)", in order to improve the long-term incentive and restraint mechanism and strengthen the positive incentive, the company formulates and implements the restricted stock incentive plan, which intends to grant 10.35 million restricted shares, and the restricted shares granted will be lifted in three phases after the expiration of 24 months from the date of completion of the grant registration. The assessment year is 2023-2025, and the performance assessment conditions are that the ROE in 2023-2025 is not lower than the average ROE4.47%;2023-2021 in 2019-2021. Compared with the average base in 2019-2021 (average 194 million), the growth rate is no less than 70%, 90%, 110%, corresponding to 3.30, 3.69, and 407 million. The turnover rate of accounts receivable in 2023-2025 is not less than the 2019-2021 average. At present, the company has awarded 8.704 million restricted shares for the first time, encouraging 174people. The implementation of the incentive plan will help to enhance the cohesion of the team, and then enhance the sustainable driving force of the company's development.

It is proposed to issue shares to raise funds to promote the sustainable development of the industry. According to the company's "2023 stock issuance plan to specific objects", in order to implement the development strategy of "north-south linkage" and "one body and two wings", promote the construction of the northern base, expand the production capacity of high voltage cable insulating materials, and enhance the research and development capacity of new materials, to increase market share and enhance anti-risk ability, the company plans to issue shares to no more than 35 investors, including controlling shareholder Qingdao West Coast New area Ocean holding Group Co., Ltd. Raise no more than 1.7 billion yuan After deducting the issuing cost, it is proposed to invest 1 billion yuan in Qingdao Wanma high-end equipment industry project (Phase I), Zhejiang Wanma Special Cable Technology Co., Ltd. annual output of 16000 km wire and cable construction project, Zhejiang Wanma Polymer material Group Co., Ltd. annual output of 40,000 tons of high voltage cable ultra-clean XLPE insulating material project 100 million yuan, Zhejiang Wanma Polymer Materials Group Co., Ltd. Shanghai New Materials Research Institute construction project 150 million yuan and supplementary working capital 250 million yuan. At present, the application materials have been accepted and feedback by Shenzhen Stock Exchange.

Risk factors: the price of raw materials fluctuates greatly; the progress of domestic replacement of cable polymer materials is not as expected; the market competition aggravates the risk; the company's new capacity construction and production progress is not as expected; the company's overseas business expansion is not as expected.

Profit forecast, valuation and rating: thanks to the high prosperity of the polymer materials industry and the accelerated pace of the company's capacity expansion, the company's order volume increased significantly in the first half of the year compared with the same period last year, and the polymer business and wire and cable business achieved rapid growth. The new energy sector has also gradually reduced losses with the improvement of operational efficiency. At the same time, the implementation of the equity incentive plan and the fixed increase project will inject new impetus into the company's long-term development and improve the company's sustainable development ability on the basis of enhancing team cohesion. We maintain the company's annual homing net profit forecast of RMB 568x1x1.05 billion in 2023-24-25, corresponding to the EPS forecast of RMB 0.55According to the valuation level of comparable companies (select Bofi Electric, Dongmei Technology, Zhongtian Technology, Hengtong Optoelectronics as comparable companies for cable and polymer business, the current average PE for 2023 is 16x based on the consensus forecast of Wind. Select Ted and Tonghe Technology as comparable companies for new energy business. Based on Wind's consensus expectation, the average PS in 2023 is 3x). Considering the clear acceleration trend of domestic substitution of high voltage land cable and submarine cable materials, and the company's leading technology and market share in the field of high voltage cable polymer materials, we think we can give a certain valuation premium to the company's 2023 cable and polymer business 20xPE, new energy business 3xPS. Maintain the target price of 14 yuan and maintain the "buy" rating.