The company issued a pre-increase announcement on the performance of the mid-term report in 2023, which is expected to achieve an attributable net profit of 28.08 million yuan in the first half of 2023, an increase of 71%. The non-attributable net profit is 15.19 million yuan, an increase of 1823%, and the performance has achieved steady growth. At the current time, we believe that the exploration of the housing pension system and the restart of CCER are expected to drive the company's stock housing testing and dual-carbon business-related demand, bringing high growth. Under the guidance of the "double-span" and "four-complete" strategy, we believe that the key layout of the company in the future, such as stock room testing, double carbon, process industry intelligent laboratory, soil survey, and so on, will have growth flexibility and maintain the "buy" rating.

Matters: the company issued an announcement of pre-increase in the performance of the mid-term report in 2023, which is expected to achieve a net profit of 28.08 million yuan in the first half of 2023, an increase of 71%, a discount of 52.25 million yuan in the second quarter, an increase of 17%, and a deduction of 15.19 million yuan in non-attributable net profit, an increase of 1823%. In the second quarter alone, the non-attributable net profit was 44.43 million yuan, an increase of 27%.

Steady growth was achieved in the first half of the year. The prosperity of the testing industry is relatively related to the macro-economy. The company still achieved rapid growth in performance in the second quarter under the weak recovery of the overall economy. We judge that on the one hand, the demand for infrastructure construction testing such as water conservancy and municipal engineering has recovered well. Local subsidiaries actively promote the transformation from the new housing market to the stock market, and the company's construction testing business is expected to maintain a rapid growth rate. In addition, it is expected that Shanghai Menuofu's performance will grow rapidly compared with the same period last year under the low base.

The housing pension system is expected to solve the problem of the source of funds, and the identification of the stock housing structure in the future is expected to form a stable demand. Recently, the Minister of Housing and Construction has mentioned many times to explore the establishment of a housing pension system to provide full life cycle security for houses. We believe that as China's stock housing gradually enters a large-scale structural identification period, the future demand is expected to be released quickly, while the main factor restricting the release of stock housing testing demand is the unclear subject of responsibility and the source of funds. The exploration of housing pension policy is expected to better solve the problem of the source of existing housing maintenance funds and provide financial guarantee for the establishment and operation of the housing safety management system. We expect that with the improvement of relevant policies and regulations, the structural identification of stock housing is expected to gradually become a stable demand. The appraisal of housing structure has higher requirements on the qualification, record, technology and personnel of the testing institutions, and has higher barriers, and the company is the only listed company on the main board of inspection and certification in the central enterprise system, with strong credibility. And the company is competitive in organization layout, testing and certification qualifications, technology and personnel, and the business income of stock housing structure appraisal has also maintained rapid growth in recent years. We expect the growth of industry demand to provide long-term growth for the company.

CCER restart is imminent, dual-carbon business is expected to accelerate growth. On July 7, 2023, the Ministry of Ecology and Environment openly solicited opinions on the "Management measures for Voluntary greenhouse Gas Emission reduction Trading (trial)" (hereinafter referred to as the "Management measures"). The CCER project, which was suspended because of small trading volume and non-standard projects, is expected to restart in 2023, which is expected to drive the demand for related testing and services. The company is a CCER certification and certification institution approved by the National Development and Reform Commission, and has been deeply engaged in the field of greenhouse gas emission reduction for many years. With professional technical team, starting from the key direction of carbon emission reduction in key industries, the company has built a platform, strong standards and extension services, comprehensively improved the service capacity in the field of "double carbon", and successively provided quality and efficient services for more than 20 provinces and cities and more than 3000 enterprises. The restart of CCER is expected to accelerate the release of related demand, and we expect the company's dual-carbon business performance to accelerate growth in the future.

Risk factors: the risk of large fluctuations in macroeconomic growth; the risk of increased competition in the industry; the risk that policy promotion is not as expected.

Profit forecast, valuation and rating: the company's endogenous extension continues to improve its testing ability and move forward to a comprehensive inspection and testing leader. In the future, the key layout of the company's dual carbon, process industry intelligent laboratory, soil survey, stock housing structure identification and other businesses are flexible, it is expected that the future income scale is expected to maintain rapid growth, market share continues to increase. We maintain the company's 2023-2025 net profit forecast of 3.16 PE, corresponding to the EPS forecast of 0.43, 0.53 and 0.64 yuan, with reference to the company's historical valuation center (38x in the past 5 years), considering that demand is still in the weak recovery stage, based on the principle of prudence, we will give 35 times the price in 2023, corresponding to the target price of 15 yuan, and maintain the "buy" rating.