Event: in the first half of 2023, the company achieved operating income of 1.57 billion yuan, an increase of 13.4% over the same period last year, a net profit of 90 million yuan, an increase of 6.6% over the same period last year, and a net profit of 80 million yuan, an increase of 15.1% over the same period last year.

In the second quarter of 2023, the company achieved revenue of 930 million yuan, an increase of 24.3 percent over the same period last year, a net profit of 70 million yuan, an increase of 43.2 percent, an increase of 274.1 percent, and a non-return net profit of 70 million yuan, an increase of 52.5 percent and 296.4 percent over the same period last year.

Q2 net interest rate increased compared with the same period last year, and the expense rate was relatively stable. In the first half of 2023, the company's sales gross profit margin was 19.5%, an increase of 0.1 ppm over the same period last year; the net sales profit margin was 5.7%, down 0.4pp from the same period last year, of which 2023Q2 net profit rate was 7.6%, an increase of 1.1pp over the same period last year. In terms of expenses, the company's sales expense rate / management expense rate (including R & D expenses) and financial expense rate are 2.3% 9.7% and 0.1% respectively, respectively, compared with the same period last year. The increase in management expenses is mainly due to an increase of 13.24 million yuan in equity incentive fees during the reporting period, and the increase in financial expense rate is mainly due to the increase in interest expenses caused by the increase in bank borrowing during the reporting period. In addition, the company continues to increase R & D investment, with a R & D expenditure rate of 4.5% in the first half of the year, an increase of 0.03pp over the same period last year. The company increases R & D investment in new energy products and incubation products, and continues to enhance the "moat" of product competition.

The performance of energy products is outstanding, and LED lighting business is under short-term pressure due to the disturbance of overseas markets. In the first half of 2023, the company's energy product revenue reached 1.16 billion yuan, an increase of 33.5% over the same period last year. Among them, the market demand for new energy products was strong, and the company's revenue increased by 55.2% over the same period last year; the gross profit margin of the energy sector was 18%, an increase of 1.1pp over the same period last year, mainly due to the scale effect of products and the profit improvement brought about by reducing costs and increasing efficiency of automation production lines. The revenue of landscape lighting was 340 million yuan, down 27.9% from the same period last year, mainly due to the decline in exports caused by weak market demand in Europe and the United States; the gross profit margin was 25.2%, an increase of 1.4pp over the same period last year. We believe that, judging from the existing cases, the company is good at realizing the extension of the industrial chain, and is expected to increase the proportion of high value-added products such as box-type substations and complete sets of Panamanian power supply in the future, driving the company's overall profit further upward.

Fund-raising multi-projects to achieve diversified expansion to support long-term and rapid development in the future. In 2020 / 2022, the company successively arranged photovoltaic, data center, energy storage and other businesses through non-public offerings, and implemented private placement in 2023, with a total financing of 2.93 billion yuan. The purpose of the company's investment in a digital plant is to improve the penetration of automated production, further reduce costs and increase efficiency, superimpose multiple layouts to achieve economies of scale, and profitability is expected to improve.

Profit forecast and investment advice. The company's revenue from 2023 to 2025 is expected to be 3.63 billion yuan, 4.72 billion yuan and 6.05 billion yuan, respectively, and the growth rate of net profit for the next three years will be 26.1%, 49% and 33.3%, respectively. The company is an established enterprise of domestic magnetic components, and the development of products and application fields go hand in hand. Multi-business is expected to bring new performance increment to the company and maintain the "buy" rating.

Risk tips: risk of macroeconomic volatility; structural price and supply risk of raw materials; risk of exchange rate fluctuations affecting the company's overseas business; risk of lower-than-expected downstream demand; risk of lower-than-expected delivery of new product research and development; risk of lower-than-expected power penetration in Panama; risk of lower-than-expected development of new customers.