Event: the company announced on August 22nd that 2023H1 realized revenue (1.28 billion yuan, + 17.81%), net profit (36 million yuan, + 345.66%), gross profit margin (16.82%, + 2.81pcts), net profit rate (2.30%, + 3.66pcts). 2023Q2 realized revenue (649 million yuan, year-on-year + 33.05%, month-on-month + 2.83%), net profit (51 million yuan, year-on-year + 1290.18%, month-on-month + 442.76%), gross profit margin (19.59%, year-on-year + 4.26pcts, month-on-month + 5.61pcts), net profit rate (8.11%, year-on-year 9.02pcts, month-on-month + 11.78pcts).

The leading enterprises of high-end wind power structure glue continue to expand and integrate the military electronic business. The company focuses on the layout of "Adhesives and New Materials Business", "Electronic Information Materials Business" and "Electronic Technology Business". Development. In the field of adhesives and new materials business, the company is mainly engaged in the development and production of adhesives, special resin new materials and other products, is one of the early domestic enterprises engaged in the field of high-end adhesives and polymer new materials, the products are widely used in the manufacture of wind turbine blades; the main products of electronic information materials include liquid crystal materials, OLED materials, etc.; in the field of electronic science and technology, the company takes Shengli technology as the electronic science and technology plate. Management platform, after 2023H1 completes the acquisition of Saiying Technology and Crystal Materials Technology, it will give full play to the business synergy of the platform holding company and combine microwave technology with digital technology to create three major military electronic product lines: embedded software, microwave hybrid integrated circuits and complete aircraft, serving airborne, shipborne and missile-borne weapon platforms.

The price of raw materials in the upper reaches of the main beneficiary fell, and H1 revenue hit a new high. 2023H1's revenue (1.28 billion yuan, + 17.81%) reached a new high, and its mother's net profit (36 million yuan, + 345.66%) turned from loss to profit, mainly due to non-operating income of about 44 million yuan from the acquisition of Saiying Technology during the reporting period. excluding the influence of goodwill, 2023H1 deducted non-net profit (- 13 million yuan, + 25.56%) increased year-on-year, the company's overall loss decreased, the company's gross profit margin (16.82%) The year-on-year growth of + 2.81pcts) is mainly due to the decline in the price of raw materials upstream of the main adhesive business, which has played a positive role in the recovery of the company's gross profit margin. As of September 11, 2023, the prices of raw materials epoxy resin (15400 yuan / ton,-42.75%) and bisphenol A (11800 yuan / ton,-38.16%) have fallen sharply from last year's highs, while the company's net profit rate (2.30%) has increased compared with the same period last year. Looking at 2023Q2 alone, the company achieved revenue (649 million yuan, year-on-year + 33.05%, month-on-month + 2.83%), year-on-year net profit (51 million yuan), gross profit (19.59%, year-on-year + 4.26pcts, month-on-month + 5.61pcts), net profit (8.11%, year-on-year 9.02pcts, month-on-month + 11.78pcts), revenue growth year-on-year, adhesive business (revenue 908 million yuan) + 34.02%, 70.99% of revenue 8.59pcts) is the main revenue support, electronic products (revenue of 82 million yuan,-14.89%, revenue of 6.44%,-2.48pcts) business orders have decreased compared with the same period last year, and related projects are in progress.

The third rate has increased, and the cost of research and development has increased significantly. 2023H1's sales expenses (44 million yuan, + 44.52%) increased, mainly due to the increase in 2023H1 travel and business work, administrative expenses (87 million yuan, + 25.64%) increased year on year, financial expenses (30 million yuan, + 60.43%) increased compared with the same period last year, mainly due to the decrease of deferred income tax assets during the 2023H1 reporting period, due to the corresponding income tax increase, R & D expenses (67 million yuan, + 51.68%) increased significantly It is mainly due to the increase of R & D investment by the company. Overall, the company's three rates (12.65%, + 1.69pcts) have increased compared with the same period last year.

Contract liabilities and inventory increased sharply compared with the same period last year, and the company actively prepared production to meet demand. The net operating cash flow of 2023H1 Company (- 111 million yuan) changed from positive to negative, mainly due to the expansion of the procurement scale of the company, the net cash flow of investment (- 253 million yuan,-86.98%) decreased significantly, mainly due to the completion of 2023H1's acquisition of Saiying Technology, and the increase in net cash flow of financing (329 million yuan, + 283.39%) over the same period last year, mainly due to the increase in borrowing obtained by 2023H1. 2023H1's contract liabilities (23 million yuan, + 321.44%) have increased significantly. We believe that the certainty of part of the company's business needs will be improved to further enhance the persistence of the corresponding business performance release. The company's inventory (844 million yuan, + 69.97%) increased significantly compared with the same period last year, of which raw materials (373 million yuan, + 33.66%) increased significantly. We believe that the company actively prepares goods and prepares production to meet downstream demand.

Stabilize the leading position of high-end adhesive and focus on the merger and integration of military and electronic plates. On the basis of the in-depth layout of the new materials business, the company relies on Shengli Technology to cut into the military electronic science and technology business through mergers and acquisitions and continue to extend the industrial chain.

① New Materials Business:

Under the guidance of the double carbon goal, the parity price of wind power will push up the rate of return on investment step by step, bringing about a rebound in the prosperity of the wind power industry. Sany can predict that the installed capacity of wind power in 2023 will be about 55-60GW, with a year-on-year growth rate of 45-60%. The company is one of the early fine chemical enterprises engaged in the development and production of medium-and high-end adhesives and polymer new materials. Epoxy structural adhesive products for wind power blades reach or exceed the level of similar products in the world, and the market share is in a leading position, which will benefit synchronously with the recovery of the wind power industry. The company plans to invest in the expansion project of high-performance epoxy structural adhesive with a construction period of 9 months, with a production capacity of 30000 tons in the first year of construction, and a sales volume of 7500 tons from October to December of that year, which passed the production plan. By adjusting and improving the production process, it is estimated that in the next five years, the production capacity will increase to 40000 tons and the annual sales volume will be 40000 tons. It is expected that after the project reaches production, it will further increase the company's main profits and stabilize its leading position in the corresponding business.

② military electronics business:

The company has successively completed the acquisition of must Control Technology and its subsidiaries Liyuan Xingda, Saiying Technology, Crystal material Technology, and added businesses such as electromagnetic compatibility, power conversion module, microwave components, ceramic materials, etc., in addition, it has expanded the MLCC, special power supply and embedded computer business through shares in Chengdu Ming porcelain, Hanwei Technology and Chengdu Liyang, followed by vertical and professional integration, the branch will look at the military business line:

Must-control technology is one of the few domestic enterprises that have passed the military standard certification to provide electromagnetic compatibility solutions, mainly engaged in a series of filter products, some of the supporting products have entered the stage of mass production; Liyuan Xingda is mainly engaged in the development and production of high-voltage to low-voltage power converters, the products have covered vehicle, airborne and shipboard and other fields. Chengdu Ming porcelain is mainly engaged in military tantalum capacitors and ceramic capacitors (MLCC), in addition, it is also used in civilian filtering, tuning, control circuits and other fields; Hanwei Technology is mainly engaged in the development and production of missile-borne and special power supplies, including ultra-small high-power, long-storage, high-overload intelligent fuze power supply, power supply for individual communication equipment, field unmanned sensor power supply, etc. Chengdu Liyang's main products are high-speed signal acquisition and processing platform and embedded domestic computer platform, which are widely used in aerospace science and technology, aviation industry, weapons group, China Electric Science, China Electronics and other units.

2023H1 has completed the acquisition of Saiying Technology, which is mainly engaged in the development and production of microwave hybrid integrated circuits and civil and military radar, which are used in airborne, shipborne, missile-borne and other weapon platforms. In addition, the company has also completed the acquisition of crystal material technology, which is mainly engaged in the development and production of ceramic raw material belt, precious metal paste, ceramic powder and other products, mainly used in the manufacture and packaging of electronic components and circuit modules of low temperature co-fired ceramic technology (LTCC), which can meet the needs of active phased array radar, electronic countermeasure and civil 5G at the same time. After the completion of this acquisition, Crystal material Technology and Saiying Technology, must Control Technology, and Ming porcelain Electronics generate effective coordination between business and customer resources in microwave components, radar, high-end filters, capacitors, resistors and other machine-level, system-level and component-level products, optimize the layout of military electronics business and create the company's second growth curve.

Investment suggestion: at present, the company has made a rapid transformation from a single-chemical adhesive production enterprise to an advanced new material R & D enterprise. From the perspective of coordination in the field of military electronic science and technology, the company has constantly improved its strategic layout and strengthened the resource linkage between industries. Specific investment recommendations are as follows:

1. The company is the leader of domestic wind power adhesive, and the prices of raw materials in the main business or benefit from upstream are further down, and the company continues lean management. The subsequent landing of new production capacity is expected to lead to non-linear growth. 2. The release rhythm of the company's military business orders may be delayed, and the follow-up is expected to land one by one with the progress of related projects. 3. The company acquires Saiying technology, crystal technology or further integrates technology and customer resources in the fields of components, filters, power supplies and embedded systems, and is expected to share the growth dividend of radar and microwave components industry.

We estimate that the company's operating income from 2023 to 2025 will be 2.697 billion yuan, 3.011 billion yuan and 3.376 billion yuan respectively, the net profit will be 98 million yuan, 202 million yuan and 296 million yuan respectively, and the EPS will be 0.32 yuan, 0.66 yuan and 0.97 yuan respectively. We give a "buy" rating with a target price of 17.00 yuan, corresponding to 53 times, 26 times and 18 times PE of the forecast EPS for 2023-2025.

Risk hints: capacity construction is not as expected, product prices fluctuate, downstream demand fluctuations, M & An integration effect is not as expected, goodwill impairment risk and so on.