Event: according to the company's semi-annual report in 2023, H1 Company achieved revenue of 7.741 billion yuan in 2023, + 2.50% year-on-year; net profit of 297 million yuan,-34.86%; and deduction of non-net profit of 265 million yuan, + 15.61%. From a quarterly point of view, the company's 2023 Q2 realized revenue of 3.807 billion yuan, year-on-year-2.41%, month-on-month ratio-3.23%; realized return-to-mother net profit of 196 million yuan, year-on-year-8.26%, month-on-month ratio + 93.86%; realized non-net profit of 177 million yuan, year-on-year-29.08%, month-on-month + 102.36%.

The revenue of metrology terminal business has increased rapidly, and the profitability has continued to improve: H1 company's performance grew steadily in 2023. From a business perspective, storage semiconductor / metrology intelligent terminal / high-end manufacturing revenue is 13.59pm 13.00 / 5.039 billion yuan respectively, year-on-year-11.16% Universe 103.28% Universe 5.09%; gross profit margin of each business is 16.59% pic32.03% Universe 8.46%, year-on-year + 2.54/+15.42/+1.62pcts. In 2023, H1 company's gross profit margin is 13.98%, year-on-year + 4.29pcts; net profit rate is 4.73%, year-on-year-1.37pcts. We believe that the substantial increase in gross profit margin is mainly due to the substantial increase in gross profit margin in export business, the sharp decline in global logistics and transportation costs and the increase in the proportion of high-margin customers' income, which leads to an increase in 15.42pcts in the measurement terminal business compared with the same period last year, which drives the growth of the company's overall gross profit margin. In terms of expenses, the H1 sales / management / R & D / financial expense rates in 2023 were 0.78%, 3.87%, 2.24% and 0.12%, respectively, and the year-on-year changes were + 0.28/+0.10/+0.03/+6.62pcts, of which the increase in financial expenses was mainly due to a decrease in the income due to delivery of derivatives in the current period compared with the same period last year.

High-end manufacturing multi-products are progressing smoothly, focusing on high value-added circuit: in the field of high-end manufacturing business, the company speeds up design capacity building, promotes the development of ODM and JDM business, focuses on high-barrier and high value-added business, and continues to improve the company's profitability. In 2023, a number of products in various downstream areas of H1 high-end manufacturing are progressing smoothly. 1) in the manufacturing of medical products, the company has increased investment in software and hardware, and a number of products jointly developed with customers have completed design verification. The telemedicine monitoring instrument jointly developed with well-known overseas telemedicine companies began mass production, and the manufacturing business of H1 medical products grew rapidly in 2023. 2) Automotive electronics manufacturing, as a global well-known automotive power battery system company Tier 2 supplier, the company has stable mass production of a number of products; 3) in the manufacturing of energy storage products, the company focuses on ODM business, a number of products have entered the certification or mass production stage. 4) in terms of consumer electronics manufacturing, as Shenzhen Science and Technology Guilin completed the transfer of 100% property rights in 2022, which is no longer included in the scope of the company's consolidated statements, the divestiture of mobile phone business led to a decline in consumer electronics manufacturing business revenue compared with the same period last year.

Storage closed test customers expand smoothly and are optimistic about Hefei Peyton's capacity release: under the background of the extensive demand for higher integration such as 5G communications, artificial intelligence, consumer electronics, Internet of things and high-performance computing and the slowdown of Moore's Law, packaging is becoming more and more important to improve the overall performance of the chip. at the same time, with the development of advanced packaging towards miniaturization and integration, technical barriers continue to rise. The closed test companies that are the first to have advanced packaging technology and capacity reserves are expected to take the lead in the industry through technology and scale barriers. As a leading independent DRAM memory chip packaging and testing company, the company has exquisite multi-layer stack packaging process capabilities and testing software and hardware development capabilities. The company implements the operation mode of Shenzhen and Hefei semiconductor closed testing dual base. In 23 years, H1 Peyton Storage in Hefei actively introduced new customers, completed the design, development and verification of new products from existing customers, and continued to climb the slope of production capacity. In order to support 5G technology and achieve high-order, high-capacity memory chip packaging, Hefei Peyton Storage actively laid out high-end closed testing, and the Bumping project has passed small batch trial production. In the future, the company will aim to meet the production capacity needs of key customers and strengthen the research and development of advanced packaging technology, focusing on flip process (Flip-chip), the research and development of POPt stack packaging technology, and the optimization of 16-layer ultra-thin chip stacking technology, and strive to become a memory chip closed test benchmark enterprise.

Downgrade the profit forecast and maintain the "overweight" rating: the company has constructed a development strategy for the three main businesses of storage semiconductors, high-end manufacturing and metrological intelligent terminals. We are optimistic that the company's storage semiconductor business will benefit from the increase in demand for advanced closed testing. Peyton in Hefei is in the stage of capacity climbing, and the future capacity expansion is expected to inject growth momentum into the company's performance. In the aspect of high-end manufacturing business, the company further improves the digital transformation strategy from three aspects: intelligent manufacturing, intelligent supply chain and digital operation, so as to improve the quality and efficiency of production and operation management. In terms of measurement terminals, overseas market expansion continues to improve, and profitability continues to improve. Taking into account that sales in the global semiconductor industry are still weak, the storage industry is still in the inventory correction cycle, and the inventory has not yet been eliminated, so the profit forecast is lowered. It is estimated that the company's net profit from 2023 to 2025 will be 8.91 billion yuan, respectively, and the EPS will be 0.570.65 yuan. The corresponding PE will be about 35X, 31x, 27X respectively, maintaining the "overweight" rating.

Risk tips: customer expansion is not as expected; capacity expansion is not as expected; downstream market demand is not as expected; competition in the closed testing industry is intensified.