On August 22, 2023, Huituangda released its semi-annual report for 2023. The company's 2023H1 achieved a total operating income of 511 million yuan, an increase of 20.05% over the same period last year, and a non-return net profit of 15 million yuan, down 77.19% from the same period last year. 2023Q2 achieved a total operating income of 305 million yuan, an increase of 32.31 percent over the same period last year, an increase of 47.59 percent over the previous year, and a net profit of 11 million yuan deducted from the previous year, a decrease of 74.28 percent and an increase of 168.54 percent over the previous year.

Backlight module short-term pressure, horizontal diversification development. The light guide structure and components produced by the company mainly include light guide film and backlight module. the function is to convert the point light source emitted by LED light source into surface light source, and the product is mainly used in notebook keyboard backlight. According to Canalys data, 2023Q2's global PC shipments fell by 12%. The current downturn in the global laptop market puts pressure on the company's backlight business revenue, but because the company's products have advantages in the vertical sector, the gross profit margin of the 23H1 light guide structure and components business reached 39.22%, an increase of 1.75pct over the same period last year. At the same time, the company is actively expanding horizontally to other areas of LED backlight applications, focusing on the development of vehicle MiniLED products and intelligent cockpit system business. in addition, the company is also looking for new growth points in the field of lighting equipment modules.

Buy letter to improve the layout of the electronic equipment industry, waterproof precision switches are widely used. The company completed the equity acquisition of Xin Weixing at the end of February 2023, and Xin Weixing became a wholly owned subsidiary of the company. Xin Weixing focuses on the field of precision connectors and precision hardware, and has formed a strong brand advantage in the field of consumer electronics, supplying products directly to Huawei, Chuanyin and other manufacturers. And supply products to Huaqin, Wentai and other contract factories to apply their products to well-known consumer electronics brands at home and abroad. In addition, Xin Weixing has established cooperative relations with BYD and Volvo in the field of new energy, laying a solid foundation for future business expansion. The ultra-small waterproof light touch switch produced by the company is widely used in notebook touchpad, intelligent wearable devices, mobile phone main keys and side keypads. With the gradual popularization of AI and VR/AR technology, the demand from the field of intelligent wearable devices will become an important growth point.

The second growth curve of power battery business. CCS module is a new type of connection bar used in lithium battery module. CCS module uses FPC or PCB to replace the traditional wire harness connection scheme. The prospect of CCS is considerable. China is the largest new energy vehicle market in the world. The mainstream power battery enterprises have a clear intention to expand production, which creates a huge market space for CCS and FPC modules.

During the reporting period, the company invested 565 million yuan in the construction project of CCS and FPC modules for power batteries and energy storage battery systems, with an annual production capacity of 1200 million CCS modules and 39 million FPC modules. The company has accumulated rich experience and customer resources in FPC and SMT processing. At present, several production lines have been completed, and the second growth curve is about to begin.

[investment advice]

In the first half of 2023, under the pressure of the laptop market, the company's backlight module business was under short-term pressure but maintained a relatively high gross profit margin, while the company diversified into areas such as automotive Mini LED.

In the first half of the year, the company completed the acquisition of Xin Weixing, improved the layout in the field of consumer electronics equipment, and the company's products are strong, supplying to Huawei, Quan Yin and other head consumer electronics brands. the ultra-small waterproof light touch switch produced by the company is applied in many consumer electronics fields and has broad room for growth. In addition, the new energy CCS and FPC modules that the company invested 565 million yuan have completed the construction of several production lines, and the second growth curve created by the company is about to begin. For the changes in the company's business during the reporting period, we have adjusted our revenue forecasts for the company. We estimate that the company's revenue in 2023, 2024, 2025 will be 1.270 million, 1.61 billion, 2.376 billion and 0.95, respectively, respectively. The net profit will be 1.33 million, and the corresponding EPS will be 0.57, 0.80 and 1.27 respectively, and the corresponding PE will be as much as 53-38-24, maintaining the "Buy" rating.