23Q2 revenue and return net profit are lower than expected, due to the international situation and macroeconomic environment and other factors, delayed delivery of equipment projects, weak overseas demand for wall-mounted furnaces led to a slight decline in casting business. The company increased research and development and developed small and medium-sized multi-variety core-making units in the first half of the year to solve the common pain points of large investment and poor flexibility of small batches of multi-variety core-making moulds in the foundry industry. We are optimistic about the company's equipment and casting two-wheel drive, as well as the increment of large casting business from 0 to 1. We maintain to give the company 25 times PE in 2023, lower the target price to 25 yuan (the original target price is 33 yuan), and maintain the "buy" rating.

23Q2 revenue and return net profit were lower than expected. On the evening of August 17, 2023, the company released the 2023 mid-term report that 2023H1 achieved revenue of 230 million yuan (year-on-year-17.5%), of which equipment 33 million yuan (year-on-year-50.4%), casting 190 million yuan (year-on-year-8.2%); return-home net profit 9 million yuan (year-on-year + 48.5%); deduction of non-home net profit-1 million yuan (year-on-year + 76.8%), the performance was lower than expected. From the perspective of 23Q2 alone, the revenue was 124 million yuan (+ 2.6% compared with the same period last year); the net profit was-1 million yuan (- 9 million yuan in the same period last year); and the non-return net profit was-5 million yuan (- 17 million yuan in the same period last year). In the first half of this year, due to the influence of the international situation and macroeconomic environment, the delivery of equipment projects was delayed, and the weak overseas demand for wall-mounted furnaces led to a slight decline in casting business. With the improvement of the economy in the second half of the year and the replenishment of wall-mounted furnace customers, we expect the company to do much better in the second half of the year than in the first half of the year. With the landing of the company in the future and the new large casting business, we believe that the company's revenue is expected to return to rapid growth in the future.

23Q2 gross profit margin and net profit margin are-4.8pcts and-9.8pcts, respectively. 23Q2 gross profit margin 27.42%, year-on-year + 6.0pcts, month-on-month ratio-4.8pcts; net profit margin-0.52%, year-on-year + 6.8pcts, month-on-month-9.8pcts, profitability improved year-on-year, thanks to the decline in raw material prices and freight charges; month-on-month decline, mainly due to the delayed delivery of 23Q2 equipment business, equipment business-related costs and expenses have been included in advance, resulting in a decline in gross profit margin and net profit margin. The overall expense rate of 23H1 has increased, mainly due to the decline in operating revenue, the sales / management / R & D / financial expense rate is respectively year-on-year + 0.23/+2.20/+1.03/-2.68pcts, we believe that as the revenue scale increases, the expense rate will decline. The company attaches importance to research and development and developed medium and small batches of multi-variety core-making units in the first half of the year to solve the common pain points of large investment and poor flexibility of small batches of multi-variety core-making moulds in the foundry industry.

The fixed increase is invested in large aluminum alloy castings, which is fully subscribed by the real controller. The company plans to raise no more than 400 million yuan from the two real controllers, with an issue price of 20.58 yuan per share, to invest in the construction of a large aluminum casting production line. After the completion of the project, the company will expand its business scope, with the production of large castings with a size of more than 1 meter or weight more than 100kg, and expand photovoltaic, new energy vehicles, aerospace, high-voltage power transmission and transformation equipment, medical equipment, high-speed rail equipment and other fields. We believe that after the completion of the project, the company will expand the scope of business and expand the application field of high-end aluminum alloy castings.

Risk factors: intensified competition in the global core equipment market; political and economic situation and policy changes in product exporting countries affect export business; customer development is not as expected; risk that aluminum alloy heat exchangers are replaced by stainless steel; raw material price fluctuations; large casting business expansion is not as expected; the progress of the increase is not as expected.

Investment suggestion: the company's 23H1 revenue and return net profit are lower than expected, mainly due to the delayed delivery of equipment projects and weak overseas demand for wall-mounted furnaces. In view of the macro environment at home and abroad, we downgrade the company's profit forecast for 2023-2025. It is estimated that the 2023-2025 EPS will be 0.99 shock 1.37 shock 1.76 yuan (the original forecast is 1.31 shock 1.71max 2.08 yuan), and the corresponding PE is 22.7,16.4 and 12.8 times respectively. The comprehensive strength of the company is strong, and we are optimistic about the two-wheel drive of the company's equipment and castings, as well as the increment of large casting business from 0 to 1. Considering that the average PE of comparable companies (Izumi, Xusheng shares, Wencan shares) will be 24 times in 2023, based on the compound annual growth rate of 30% of the return net profit in the next three years, and the performance flexibility brought by the fixed increase of large casting projects, we maintain the company's 25 times PE in 2023, lowering the target price to 25 yuan (the original target price is 33 yuan), and maintaining the "buy" rating.