According to the semi-annual report released by the event company, the total operating income in the first half of 2023 was 1.981 billion yuan, an increase of 57.53% over the same period last year, and the net profit returned to the mother was 298 million yuan, an increase of 30.04% over the same period last year.

The revenue side is growing rapidly, and the performance side is growing steadily in line with expectations. 2023H1 has revenue of 1.981 billion yuan (YOY+57.5%) and Q2 revenue of 1.038 billion yuan (YOY+60.6%) in a single quarter. 2023H1's parent net profit is 298 million (YOY+30.0%), Q2 single-quarter results are 155 million (YOY+27.1%), the performance growth is steady, in line with expectations.

Revenue side: the company's 23H1 revenue increased rapidly, mainly due to sufficient orders and smooth business expansion, especially in electric power and petrochemical forgings, with revenue growth rates of 295.9% and 69.6%, respectively. In terms of energy business, the company undertakes national key scientific research projects to help break through the technical bottleneck, and the wind power business is growing rapidly. In terms of aerospace business, the company strengthens its ties with various main engine factories, participates in the development and trial production of many new models, completes the development of new customers and part of the trial production of die forging business, deepens its cooperation with Luo Luo and GE, and some of the trial products have received batch production orders. 23H1 aerospace forgings business revenue growth rate of 20.2%, showing a steady growth trend.

Profit side: the company's 23H1 performance grew by 30.0%, which is lower than the revenue growth rate, mainly for two reasons. First, other income subjects in the current period are only 7.36 million, down 459.4% from 40 million in the same period last year, due to the reduction of VAT-exempt products and government subsidies. Second, the company's current assets and credit impairment losses totaled 69 million, a year-on-year increase of 249.8%.

Debt side: the company's current contract debt balance is 39 million, an increase of 65.1% over the beginning, indicating that the order growth trend is good, and the overall development of the company is improving.

Cash flow: the operating cash flow increased by 47.0% compared with the same period last year, and the turnover rate of accounts receivable was 1.79 times, which increased 0.15 times compared with the same period last year.

The profitability of the main aerospace industry has improved significantly, and the cost side has improved as a whole. The company's 23H1 gross profit margin of 26.7%, a slight decline in 0.3pct compared with the same period last year, is mainly due to changes in product structure. The gross profit margin of some segments of the business increased significantly, including the gross profit margin of the electric forging business increased from-6.2% to 18.7%, and the gross profit margin of aerospace forgings increased by 48.0%, an increase of 3.5pct over the same period last year, the highest since the income disclosure was adjusted in 2020. In addition, the company's expense rate (including R & D) during the 23H1 period was 7.3%, which was lower than the same period last year (0.5pct), in which the management and financial expense rates were reduced by 0.4pct respectively, resulting in a lean management effect.

Following the fixed increase of 1.6 billion, it is proposed to issue another 1.95 billion convertible bonds, die forging + ring forging its strength, the competitive advantage is expected to continue to expand. The company has completed 1.6 billion fund-raising in 22 years, expanded die forging business, and is expected to be put into production in 24 years. With the full production of the project in the future, 4800 tons of die forgings will be added, with an annual revenue of 1.76 billion yuan and a net profit of 434 million yuan. In the near future, the company plans to issue 1.95 billion convertible bonds for production expansion, parts processing and replenishment of ring forgings. After it is put into production in the future, the company will increase the annual production of aerospace ring forgings by 5500 tons, accounting for 134% of the relevant production capacity in 2022, and the precision machining capacity of 41740 pieces will be added when the parts processing project reaches production. We believe that the company's future production capacity does not worry, with the advanced production capacity layout, will deeply benefit from the development of China's aerospace industry.

Investment suggestion: the company's net profit from 2023 to 2025 is expected to be 6.39 PE 7.88 / 949 million respectively, with a compound growth rate of 25.0% over the next three years. With reference to the comparable company valuation, the company's current valuation advantage is obvious.

Cover for the first time and give a "recommended" rating.

Risk Tip: the risk of military orders falling short of expectations and product price fluctuations.