Event: the company released the 2023 mid-term report, during the reporting period, the company achieved operating income of 4.887 billion yuan, year-on-year-0.53%, net profit of 84 million yuan, + 15.42%; deduction of non-return net profit of 72 million yuan, + 14.37% of the same period last year.

23H1 gross profit margin improved, new energy business accounted for an increase. In the first half of 2023, due to the price reduction of silicon materials, the price of battery chips declined somewhat, and the income of the battery plate was 3.472 billion yuan, down 1.76% from the same period last year. At the same time, the demand for graphite electrodes was weak due to the influence of the economic situation at home and abroad and competition in the carbon industry. The income of graphite electrodes and related products was 307 million yuan, down 45.37% from the same period last year. Benefiting from the decline in the price of raw materials and the improvement in the level of industrial automation, the gross profit margin has improved, including 11.33% for the battery business, + 6.75% for the same period last year, and 11.92% for the graphite electrode-related business, + 6.74% for the same period last year. It is expected that in the second half of the year, with the rise of raw materials and the recovery of demand in the steel industry, the price and demand of graphite electrodes are expected to usher in an inflection point. The company's components aluminum frame, photovoltaic power generation, lithium battery, energy storage and other business increased in the first half of the year, accounting for 21.52% of revenue, up from 14.13% in the same period last year.

In terms of photovoltaic power generation, the operating income during the reporting period was 43 million yuan, + 22.86% compared with the same period last year. The company has planned to achieve the goal of developing and building 3GW wind and photovoltaic power stations by 2025, and is expected to achieve the goal of full capacity connection of 3GW to the grid by 2026. As of 23H1, the cumulative installed capacity of Central Plains Golden Sun is 139.67MW, which is still a huge gap from realizing green power replacement of 35% of the group's total electricity consumption. The project has been connected to the incremental distribution network of China Pingdingshan Shenma Group, and it is expected that the future capacity digestion will be guaranteed. The company's power plant development performance can be expected to increase.

The investment in R & D has increased greatly, and the liquid flow energy storage is worth looking forward to. During the reporting period, the company's expense rate was 9.18%, year-on-year + 3.6pct, of which the management expense rate (including R & D) was 7.22%, and the year-on-year + 2.66pct. Many of the company's businesses were in the period of expansion, resulting in an increase in costs. The company increased innovation and R & D efforts, and invested 187 million yuan in R & D, + 73.31% compared with the same period last year. Speed up industrial technology research and development work such as all-vanadium flow energy storage battery, graphite bipolar plate, graphene thermal conductive film, separation and purification of coal tar chemicals, and multi-scene application of photovoltaic power station, with the development of new carbon materials and energy storage products as the main goal. In terms of liquid flow energy storage, the wholly-owned subsidiary Kaifeng era has fully mastered the energy storage technology of the new generation all-vanadium flow battery, which comes from the second generation all-vanadium flow energy storage technology of Dalian Chemical Institute, has the capacity of 300MW/ annual all-vanadium flow energy storage system, and the core key components have achieved independent research and production. At present, the kilowatt-hour cost of all-vanadium flow energy storage battery is in a downward channel, which is an intrinsically safe energy storage scheme in the future. All-vanadium liquid flow energy storage power station will be the key business of the company.

Plan to raise an additional 2.5 billion yuan plus negative pole integration layout. On March 30, the company disclosed a plan to raise no more than 2.5 billion yuan by issuing shares to no more than 35 specific investors, including the controlling shareholder, China Pingping Coal Shenma Group. For lithium-ion battery anode material development and production construction project (Phase II), annual output of 30,000 tons of high-performance lithium-ion battery anode material project, Baofeng County 100MW distributed photovoltaic power station project, Weidong District 50MW distributed photovoltaic power station project, supplementary liquidity. China Pingping Coal Shenma Group has pledged to subscribe for 10% of the total number of shares in the offering. At present, the production capacity of domestic anode materials, especially graphitization processing, is relatively scarce. after the completion of this 60,000 ton anode material project, the company will rely on the long-term stable supply capacity of the supplier system, as well as its own advantages in raw material supply, energy cost and key customer development, to fill the regional capacity gap of the whole industry chain of negative materials in Qinghai and Henan. At present, the cooperation with foreign customers A, Ningde era, Yiwei Lithium Energy, Penghui Energy and other head companies is smooth, the company speeds up the integrated industrial layout of negative materials, and the future growth is expected.

Investment suggestion: the company is firmly committed to the development strategy of "new energy and new materials", and the cost advantage brought by industrial coordination is expected to appear gradually. In addition, as an important new energy and new materials listing platform of Pingdingshan Shenma Group, the current "3 / 6" strategic goal is clear, with the fund-raising project gradually put into production, the performance is expected to stabilize and improve. We predict that the return net profit of the company in 2023-25 is 4.44,6.40 and 923 million yuan respectively, corresponding to EPS 0.20,0.29,0.42 yuan, PE 24,17,12 times, covering for the first time and giving "buy" rating.

Risk tips: 1. The installation of new energy is lower than expected. 2. the research and development of new products is lower than expected. 3. The competition in the industry is intensified.