Event: the company issued a performance forecast for the first half of 2023 on July 18, 2023. In the first half of 2023, the company realized a net profit of 80.409 million yuan to 81 million yuan, which was + 60.2% less than the same period last year. 61.4%, while non-net profit was deducted from 77.918 million yuan to 78.508 million yuan, which was 54.4% higher than the same period last year.

Comments:

Industry expansion + pattern optimization, the company's performance is improving. Based on the net profit center of 81 million yuan in the first half of 2023, the net profit center of 2023Q2 company is 45 million yuan, + 103.4% compared with the same period last year, and + 24.3% compared with the same period last year. Under the trend of electric intelligence, the demand for new high-voltage lines and data lines has greatly increased the value of automobile cables and bicycles from 1000 yuan for traditional fuel vehicles to 1500-2000 yuan for electric vehicles, and the scale of the industry has doubled. Under the background of industry expansion, the joint venture cable factory is strategically shrinking the cable business with low profit margin, and the local cable manufacturers usher in the opportunity of domestic substitution. As a local cable leading enterprise, the company has strong first-mover advantages in products, customers and production capacity, and is expected to fully enjoy the industry dividend and take the lead by virtue of the first-mover advantage.

Upstream raw material copper prices have fallen, driving the company's profits up. Copper accounts for a large proportion of the company's raw materials, accounting for about 80% of the cost structure. The price of electrolytic copper fell somewhat in the first half of 2023. The average price of electrolytic copper in 23Q1 and 23Q2 was 68,000 yuan / ton and 67,000 yuan / ton respectively, down 4.4% and 6.4% respectively compared with the same period last year. The price of raw materials on the cost side fell, driving up the company's profits.

Production capacity has advanced steadily, and it is proposed to issue convertible bonds to raise investment and expand production again. The company issued an announcement on April 25, 2023, intending to issue convertible bonds to raise investment and expand production. This convertible bond plans to raise 530 million yuan, of which 250 million yuan is invested in the Hubei Cabo project, 200 million yuan in the new energy vehicle cable expansion project, and 80 million yuan in the new energy vehicle cable insulation material reconstruction and expansion project. We believe that the funds raised by convertible bonds are expected to help the company to further expand its production capacity and further increase its market share in the nearby supporting production.

Profit forecast and investment rating: we believe that the company will benefit from electrification, intelligence and import substitution in the medium and long term, and its performance is expected to continue to grow. We estimate that the return net profit of the company from 2023 to 2025 is 240 million yuan, 350 million yuan and 490 million yuan, the corresponding EPS is 2.66,3.90,5.52 yuan respectively, and the corresponding PE is 22 times, 15 times and 11 times respectively.

Risk factors: the sales of new energy vehicles are not as expected; the promotion of special cables is not as expected; the risk of rising prices of upstream raw materials.