Event: according to the company's semi-annual report on 2023, H1 Company achieved revenue of 250 million yuan in 2023, + 3.24% year-on-year; net profit of 42 million yuan,-19.58%; and deduction of non-net profit of 40 million yuan,-26.61%. From a quarterly point of view, the company's 2023 Q2 realized revenue of 126 million yuan, year-on-year-2.29%, month-on-month + 1.79%; realized return-to-mother net profit of 26 million yuan, year-on-year-17.51%, month-on-month + 52.70%; realized deduction of non-net profit of 24 million yuan, year-on-year-31.26%, month-on-month + 48.04%.

H1 business differentiation is obvious, during the period of expense growth is a drag on profits: H1 company revenue maintained slight growth in 2023 mainly due to precision manufacturing and other business automation equipment sales revenue increased offset by the decline in game console parts business. From a product point of view, the revenue of game console parts / connectors / precision manufacturing and other products is 149000000000 yuan respectively, compared with the same period last year.-4.49% Universe 6.56% Universe 219.06%. In 2023, H1 company's gross profit margin was 34.19%, year-on-year-1.16pcts, mainly due to the game machine parts business with higher gross margin, the current gross profit margin decreased by 3.78pcts year-on-year and revenue share decreased; the net profit rate was 16.48%, year-on-year-5.19pcts, mainly due to a substantial increase in fees during the period dragging down profits. In terms of expenses, the rate of H1 sales / management / R & D / financial expenses in 23 years is 2.01%, 9.33%, 5.33% and 0.09%, respectively, and the change score in the same period is + 0.24/+1.53/-1.41/+5.05pcts. Among them: 1) sales expenses, management expenses, and R & D expenses increased by 2.185 million yuan over the same period last year, mainly due to the relocation of the parent company to the new plant in December 2022. At the same time, Zhi Shang Light Speed and We Sum Vietnam, a subsidiary of the company, have carried out business activities, and the current period of depreciation and amortization, office and water and electricity expenses, and travel expenses have increased. 2) Financial expenses:

The net interest expenditure of 4.8863 million yuan is mainly due to the large amount of fixed assets borrowed by the parent company due to the purchase of the new plant, Chunsheng Electronics's large loan due to the infrastructure of the connector expansion project, and the exchange earnings decreased significantly due to the appreciation of the US dollar.

Deeply bind the leading manufacturers of game consoles, game consoles + AR/VR to support the core business: the company's game parts products are represented by slide rails, Tact Switch, card slots, precision positioning controllers and game console connectors, which are mainly used in Japanese well-known company N, Sony Group Corp's mainstream game console products. In N Company's latest generation of game console Switch OLED, the company took the lead in becoming the first imported supplier. The company has reached a long-term cooperative relationship with Japan's N Company, Sony Group Corp and other well-known game console companies. with the update and iteration of N Company and Sony Group Corp's mainstream game consoles in the future, the company is expected to continue to benefit from the increased demand for new products. At the same time, the company's Joy-stick rocker series has successfully passed the Meta certification in 2020, which is used as the control handle of VR/AR products under Meta's Oculus brand, and begins to be supplied in batches.

According to the Meta financial report, the new product Quest 3 will be launched this autumn, entering the traditional peak season of consumer electronics in the second half of the year, and the company's rocker products are expected to benefit from the increase in the contribution of new products to the game console parts business.

Benefiting from the increased demand for high bandwidth in optical communications, the market for optical fiber connectors is vast: according to Research andMarkets data, the global market for optical fiber connectors is about US $5.01 billion in 2022 and is expected to reach US $7.78 billion by 2027, with a CAGR of 9.2%. The steady growth of end-user demand for high-bandwidth services has promoted the continuous expansion of the market scale of optical fiber connectors. The company's optical fiber connector products include single-core and multi-core MPO optical fiber jumpers, etc., mainly serving 4G/5G communications, application scenarios include data center, FTTH and FTTA, etc., customers include well-known enterprises such as SENKO and special messages. In the future, with the acceleration of 5G construction, data center and other "new infrastructure" construction, optical fiber connectors will be increasingly rich in application scenarios, and the scope of application will also continue to expand. In September 2023, the company announced its intention to further acquire an 11% stake in Fukosima. After the acquisition, Fukosima will become a holding subsidiary of the company, further enhancing the company's service capability in the field of optical communication products. In terms of production capacity, the Vietnam factory is mainly responsible for the production and sales of optical fiber connectors. We are optimistic that the production capacity of optical fiber connectors in Vietnam factories will gradually expand in the future, which is expected to open up room for growth for the company.

For the first time, the company is committed to the R & D, design, production and sales of game consoles, VR/AR equipment, professional audio-based consumer electronics, communication electronics and automotive electronics. The main products include game machine parts, electronic connectors, optical fiber connectors, precision structural components and metal milling tools, automation equipment, etc. The application covers all kinds of consumer electronics, communication electronics, automotive electronics and other fields. As a rare supplier of game console parts in China, the company is deeply bound to N Company, Sony Group Corp, Meta and other leading manufacturers of game consoles and AR/VR, and is expected to benefit from the recovery of downstream terminal demand. At the same time, the company is actively developing the optical fiber connector business, and we are optimistic that this business will benefit from the growth of high bandwidth demand in the long run, with high certainty of performance growth. It is estimated that the net profit of the company from 2023 to 2025 is 134 million yuan, 187 million yuan and 246 million yuan, and the EPS is 1.04,1.45,1.91 yuan respectively, and the corresponding PE is 48x, 34x and 26x respectively.

Risk tips: macroeconomic fluctuation risk, lower-than-expected demand for game consoles, high customer concentration risk, exchange rate fluctuation risk.