In the first half of 2023, with the continuous improvement of the profitability of copper tube business, the company's performance reached an all-time high. The company's copper foil products to achieve large-scale production, the second half of the order volume is worth looking forward to. In the future, with the production and operation optimization of overseas bases such as the United States, Europe and Indonesia, the company's performance is expected to maintain steady growth. We estimate that the company's 2023-25 net return profit will be 1,524,807 million yuan, giving the company a 2023 valuation of 20 times PE, corresponding to a target price of 15 yuan, and maintaining a "buy" rating.

The performance grew steadily in the first half of the year, and 23Q2's single-quarter net profit reached an all-time high. In the first half of 2023, the company achieved revenue of 43.773 billion yuan, an increase of 14.9% over the same period last year, and a net profit of 717 million yuan, an increase of 10.1% over the same period last year. The net profit after deducting non-return was 858 million yuan, an increase of 52.2% over the same period last year. Non-recurring gains and losses are mainly the fair value changes brought about by the company's foreign exchange transactions. 2023Q2's single-quarter revenue was 24.3 billion yuan, an increase of 24.4% over the same period last year and 24.8% year-on-month, with a net profit of 384 million yuan and an increase of 13.1% over the previous year. 23Q2's single-quarter revenue and return net profit hit record highs.

The profitability of copper tube business continues to enhance, and the logic of competition pattern optimization continues to be realized. The gross profit margin of the company's copper tube business in the first half of 2023 was 6.43%, an increase of 0.65pct over the whole of 2022 and 1.96pcts higher than the low of 2021. The gross profit per ton of copper pipe products rose to 4225 yuan per ton, nearly 2000 yuan higher than the low point in 2021.

With the improvement of the concentration of the copper tube industry, the optimization of the competition pattern, the transformation and upgrading of the company's production line and the adjustment of the customer structure, the profitability of the company's main copper tube industry continues to improve. In the first half of 2023, the company's copper bar business revenue fell 22.8%, but the gross profit margin increased 1.36pcts compared with the whole of 2022, indicating that the company's copper bar business profitability has bottomed out.

The copper foil business is advancing rapidly, and the order volume in the second half of the year is worth looking forward to. In the first half of 2023, the company's copper foil business achieved revenue of 176 million yuan, and we estimate that the company's copper foil sales in the first half of the year are close to 3000 tons. In June 2022, the company's first copper foil production line was trial-produced, and the company achieved large-scale delivery within a year, reflecting the company's excellent product performance and strong customer development ability. The company is currently building an annual production capacity of 150000 tons of copper foil in Lanzhou, Gansu Province, and has a mass production capacity of 4.5-9 μ m and quickly cut into the leading enterprises in the power battery and energy storage industry. The company's copper foil shipments are expected to increase rapidly in the second half of the year.

The layout of overseas production capacity continues to be strengthened, and the company creates a differentiated competitive advantage. The company has 22 production bases around the world and has become the largest and most internationally competitive copper pipe and rod manufacturer in the world. With the completion and commissioning of the company's base in the United States and the optimization of its European base operation, the company's copper tube and copper bar business is expected to maintain steady growth. In March 2023, the company announced that it would set up a subsidiary in Indonesia to be responsible for the construction and operation of the copper foil project with an annual capacity of 100000 tons, becoming the first overseas copper foil enterprise in China. At present, with the fierce competition in the domestic copper foil industry and the decline in corporate profitability, the company's overseas construction of copper foil production capacity to implement market differentiation strategy is expected to seize the overseas market and enhance the profitability of copper foil products as soon as possible.

Risk factors: intensified competition in the copper foil industry led to lower-than-expected profit growth in the company's copper foil business; lower-than-expected progress in capacity construction and production line transformation; the risk of sharp exchange rate fluctuations; and lower-than-expected demand growth.

Earnings forecast, valuation and rating: in the first half of 2023, the company's performance reached an all-time high with the continuous improvement of the profitability of the copper tube business. The company's copper foil products to achieve large-scale production, the second half of the order volume is worth looking forward to.

In the future, with the production and operation optimization of overseas bases such as the United States, Europe and Indonesia, the company's performance is expected to maintain steady growth. Taking into account the decline in corporate profitability as a result of increased competition in the copper foil industry, the profit contribution of the company's copper foil business is lower than previously expected, we downgrade the company's 2023 and 2024 homing net profit forecast of 1.807 billion yuan (the original forecast is 214,99.81 billion yuan), and the new 2025 forecast is 2.649 billion yuan, corresponding to the EPS forecast of 0.770.91max 1.33 yuan. Reference to comparable companies Chujiang Xincai and Jiayuan Technology 2023 PE valuation average (Wind consensus expectations) of 20 times, give the company 2023 PE valuation, corresponding to the target price of 15 yuan, maintain the "buy" rating.