Event: the company issues the 2023 half-yearly report. 1) the operating income of 2023H1 Company reached 719 million yuan, up 6.09% from the same period last year; the net profit belonging to shareholders of listed companies was 104 million yuan, down 23.34% from the same period last year; and the net profit after deducting non-return was 86 million yuan, down 29.91% from the same period last year. 2) the operating income of 2023Q2 Company reached 390 million yuan, up 9.51% from the same period last year; the net profit belonging to shareholders of listed companies was 63 million yuan, up 3.58% from the same period last year; and the net profit after deducting non-return was 56 million yuan, up 1.61% from the same period last year.

PLC drives the servo strategy to the ground, and the servo product increases significantly. The company's 2023H1 realized operating income of 719 million yuan, an increase of 6.09% over the same period last year. In the report, the company made full use of the brand advantage of PLC to actively expand the market, with a sales revenue of 249 million yuan and a gross profit margin of 55.03% during the reporting period. Drive system business sector, the company through the PLC servo strategy gradually landed, sales revenue increased by 23.20% year-on-year, achieving sales of 361 million yuan. The company achieved sales of 91 million yuan in HMI products, with a gross profit margin of 32.15%, sales revenue decreased by 6.59% year-on-year, and gross profit margin increased by 2.64pct. The company's revenue from smart devices reached 15 million yuan, up 12.23% from the same period last year, with a gross profit margin of 14.39%. Among all kinds of products of the company, the growth rate of servo products is relatively fast.

Gross profit margin increased month-on-month, profitability recovered. The company's 2023H1 gross profit margin is 32.86%, year-on-year-4.70pct; return net profit margin is 14.47%, year-on-year-5.56pct; deduction of non-parent net profit margin is 11.97%, year-on-year-6.15pct; period expense rate is 21.67%, year-on-year + 1.91pct. The company's 2023Q2 gross profit margin is 34.08%, month-on-month + 2.68pct, year-on-year-1.42pct; homing net profit margin is 16.16%, year-on-year-0.92pct; deducting non-homing net profit margin is 14.29%, year-on-year-1.11pct. The company's gross profit margin rebounded in the second quarter compared with the previous quarter, and its profitability has recovered somewhat. Looking forward to the follow-up, the unfavorable factors such as industry price war and high-priced raw material inventory will be gradually eliminated, and the company's profitability is expected to be further improved. In the process of China's transformation from a "manufacturing power" to a "manufacturing power", the industrial automation industry still has a very broad space for development, and the company's long-term prospects are good.

Profit forecast and investment advice: we expect the company's operating income to be RMB 16.42 million in 2023-2025, compared with the same period last year, with a year-on-year increase of + 23.0%, 22.06%, 2100%, and net profit of 2.49, 307, 370 million, and + 12.29, 23.08, 20.69%, respectively, respectively, and the corresponding PE is 2.63 times that of 22-18-15. Maintain a "buy" rating.

Risk tips: raw material price fluctuation risk, downstream demand recovery level is not as expected, product research and development promotion is not as expected, etc.