This report is read as follows:

The company's performance is in line with expectations, the air-conditioning filtration business is sound, and the diversified business is beginning to show results. Increase your holdings.

Main points of investment:

Investment suggestion: the company's 2023H1 performance is in line with expectations, the air-conditioning filtration business is sound, and the diversified business is beginning to achieve results. Considering the long promotion cycle of filter-related business of new energy vehicles, we downgrade this part of business to bring about performance growth. It is estimated that the EPS for 2023-2025 will be 0.39x0.55 EPS 0.74 (the original value is 0.47pm 0.63pm 0.81, compared with the previous-17% Universe 12% Universe 9%), year-on-year + 21% Universe 42% Universe 33%, refer to the industry to give the company 2023 35xPE Lower the target price to 13.6 yuan, "overweight" rating.

Revenue and deduction are in line with expectations: the company's 2023H1 revenue is 409 million yuan, year-on-year + 6.65%, return-to-mother net profit 41 million yuan, year-on-year-12.31%; of which 2023Q2 revenue is 203 million yuan, year-on-year + 11.54%, return-to-mother net profit 21 million yuan, year-on-year-12.92%, deducting non-return net profit 19 million yuan, year-on-year + 20%.

The air-conditioning filtration business is sound, and the initial results of the diversified business are as follows: 1) Air-conditioning filtration business: Q2 is expected to maintain steady single-digit growth; 2) Clean electrical filtering-related business: 2023H1 has achieved substantial growth in this field, of which Tian Ke's sales have increased by more than 40%. 3) Automotive filtering related business: 2023H1 achieves mass production and supply to some domestic and foreign head enterprises. In the afterloading market, the company has reached a deep cooperation with a domestic head one-stop maintenance platform. At the level of domestic and export sales, the company's overseas income in the first half of 2023 was 235 million yuan, + 6.19% compared with the same period last year. Taking into account the increased strategic investment of the company's major overseas customers in Southeast Asia and other regions, the company's share of overseas revenue is expected to further increase.

Inventory turnover increased, cash flow improved significantly: the company increased inventory turnover by optimizing the payment structure and other ways, ending inventory in the first half of 2023 was 92.8 days, compared with-20.04 days. The net cash flow generated by 2023H1's operating activities was 64 million yuan, + 48.96% compared with the same period last year. The improvement of the company's turnover efficiency promoted the improvement of cash flow.

Risk hint: the pace of new business development is uncertain.