Event: according to the company's semi-annual report on 2023, H1 achieved a revenue of 1.763 billion yuan in 2023, a year-on-year income of-1.18%, a net profit of 36 million yuan, a year-on-year net profit of-25.81%, and a deduction of non-net profit of-3 million yuan, turning a loss over the same period last year. From a quarterly point of view, the company's Q2 realized revenue of 961 million yuan in 2023, + 7.48% year-on-year and + 19.78% month-on-month; realized net profit of 16 million yuan,-60.23% year-on-year and-15.08%; deducted non-net profit of 12 million yuan,-73.11% year-on-year, and turned losses into profits.

Demand pressure drag H1 performance, Q2 revenue improvement: the company's 23H1 performance decline mainly due to consumer electronics demand pressure caused by MIM revenue decline, a drag on the overall performance. Q2's overall revenue growth compared with the previous month, we believe that the MIM business benefited from the recovery in downstream consumer electronics demand, revenue growth of 71.06%. From a product point of view, the income of H1 powder compaction P&S/ soft magnetic composite SMC/ metal injection molding MIM in 2023 was 876 million RMB 488pm respectively, compared with the same period of last year-1.77% Universe 67.23% Compact 34.01%. In 2023, H1 company's gross profit margin was 18.74%, year-on-year-2.30pcts; net profit rate was 1.33%, year-on-year-1.65pcts. In terms of expenses, the rate of H1 sales / management / R & D / financial expenses in 2023 was 1.43%, 5.96%, 7.33%, 2.80%, respectively, and the year-on-year change + 0.00/+0.02/-0.02/+0.29pct. The slight increase in financial expenses was mainly due to the decrease in exchange earnings.

Focus on the development of SMC business, omni-directional layout Xu Li long-term growth: the company steadily do a good job in the development of Packers, MIM plate at the same time, focus on the development of SMC plate. In 2023, H1 Company grasped the development opportunities of optical storage and other new energy industry, and the development of SMC plate stepped into the "fast lane". 1) client, the company is currently a supplier of Tesla, Inc. soft magnetic composite materials, the company's SMC business and Tesla, Inc. in-depth cooperation. Soft magnetic composites have a large number of application opportunities in new energy vehicles, such as charging piles, chargers and boost inductors. with the development of new energy vehicle charging piles to fast charging and high voltage, the soft magnetic application scene will continue to expand. (2) in terms of technology reserve, the company's associate, Ningbo Dongmu Guangtai, acquired a total of 12.00% equity interest in Shenzhen Xiaoxiang Electric Company, which has independently developed core technologies such as concentrated magnetic axial flux motor and control algorithm, which will help to understand the specific application of soft magnetic composite material SMC technology in soft magneto, thus expanding the application scenarios of this technology in high-end manufacturing fields such as soft magneto. 3) in terms of production capacity, the company's Shanxi Linyi "soft magnetic material industry base project with an annual output of 60,000 tons" is being accelerated. In addition, the construction of the SMC production line at Ningbo headquarters has also achieved preliminary results, and some high-end SMC products have been supplied in small quantities.

Packs promotes technology integration, MIM continues to optimize product structure: 1) packs plate: home appliances field air conditioning compressor and refrigerator compressor is one of the main application areas of powder compaction packs parts, the company actively develops new products for customers, increases the development of new energy vehicles, power tools and other fields, while increasing the integration of packs and SMC technology. Use the suppression technology of packs and various process technologies to cooperate with SMC to expand new application scenarios. In 2023, the company's joint venture raised the shareholding of Shenzhen Xiaoxiang Electric Technology Co., Ltd. to 12%, further enhancing its influence on Shenzhen Xiaoxiang Electric Technology Co., Ltd., in order to strengthen the technical research on the application of motor and non-automotive powder metallurgy, and explore the technical application of powder metallurgy in motor, electric control and other directions. The company relies on years of deep ploughing packs technology platform resources and experience accumulation, packs plate has a strong competitive advantage at home and abroad. 2) MIM plate: the company mainly supports liquid metal with relevant domestic customers, focusing on providing customized development and production services of MIM parts + hinge components for folding screen mobile phones in the field of consumer electronics; at the same time, continue to promote new product development, especially long-term business such as medical devices and automobiles, optimize product structure, and gradually reduce the impact of fluctuations in the consumer electronics industry. The company has accumulated rich customer resources in the automotive industry in the field of powder metallurgy pressing forming, and has formed a mature management system and corporate culture adapted to the characteristics of the automotive industry, which is expected to lead the company to make a great breakthrough in the application of MIM technology plate in the automotive field and form incremental business.

The company is mainly engaged in the research and development, production, sales and value-added services of new materials and their products, and its main products are powder metallurgy pressed parts, metal injection molding parts, soft magnetic composites and so on. The company is based on the three new material technology platforms of powder compaction forming packs, soft magnetic composites SMC and metal injection molding MIM, and gives full play to the collaborative advantages of the three technology platforms in technology, customer and management, covering downstream new energy, new materials and other high-end manufacturing applications.

We are optimistic that the company, as the domestic leader in powder metallurgy, is currently actively focusing on the development of SMC business. Considering that the future high prosperity of new energy and automotive electronics downstream is expected to bring long-term increments for the company, it is estimated that the company's 2023-2025 return net profit is 185 million yuan, 272 million yuan, 356 million yuan, EPS is 0.30,0.44,0.58 yuan respectively, corresponding to PE is 39X, 26X, 20X respectively.

Risk hints: macroeconomic fluctuation risk, lower-than-expected demand, raw material price fluctuation risk, exchange rate fluctuation impact.