Event: The company released its 2023 semi-annual report. In the first half of 2023, the company achieved revenue of 395 million yuan, an increase of 5.01% over the previous year; achieved net profit of 50.45 million yuan, an increase of 15.52% over the previous year; and achieved net profit of 43.67 million yuan after deducting non-net profit of 43.67 million yuan, an increase of 13.31% over the previous year.

Revenue resumed growth in the second quarter, and the revenue to cash ratio improved: benefiting from downstream demand for new energy application materials, the company's revenue resumed growth in the second quarter. It achieved revenue of 220 million yuan in a single quarter, an increase of 9.71% over the previous year, and new energy application materials achieved revenue of 245 million yuan in the first half of the year. The company's ability to repay has also improved, with the cash to revenue ratio of about 86% in the first half of 2023, up from 71% in the same period in 2021 and 68% in the same period in 2022.

Sales and management expenses were better controlled, and R&D investment was strengthened: in the first half of 2023, the company's expenses were better controlled. Sales expenses were 20.78 million yuan, an increase of 8.12%, a year-on-year decrease of 3.37 percentage points; management expenses incurred were 28.3 million yuan, an increase of 18.87%, and the growth rate decreased by 2.11 percentage points over the previous year. At the same time, the company continued to increase R&D investment. R&D expenses during the same period were about 2,186 million yuan, an increase of 37.03% over the previous year; the cost ratio was 5.54%, 1.30 percentage points higher than the same period last year. Among them, the company's introduction of R&D personnel caused the total remuneration of R&D personnel to increase by about 31% year-on-year; the consumption of R&D materials to develop new products increased by about 70% year-on-year.

Product development continues to break through, and customer verification continues to advance: in the first half of 2023, the company further broke through UV rapid curing technology for silicone materials and achieved applications in high-end equipment, photovoltaics, etc., and is expected to achieve great development in automotive electronics in the future. In the field of communications, the company developed several key packaging materials for 5G communication chips and achieved final industrialization. The company's integrated circuit packaging materials have also been recognized by downstream customers. The lid frame adhesive materials have been verified by leading domestic customers, received small-batch orders, and shipped; some models of chip-grade bottom fillers, chip-grade thermal interface materials, and DAF film materials have been verified by key customers.

Investment suggestions: It is expected that the company's new energy application materials will continue to grow rapidly in 2023, and products in the IC and smart terminal fields are expected to be gradually expanded thereafter. The company is expected to achieve operating income of 1,252, 1631, and 2.122 billion yuan respectively in 2023-2025, and net profit of 174 million, 267 million yuan, and 394 million yuan, corresponding EPS of 1.22, 1.88 and 2.77 yuan respectively. Maintain a “buy” rating.

Risk warning: Technology research and development falls short of expectations, downstream demand expansion falls short of expectations, and market competition intensifies.