The company's 23H1 realized income of 980 million yuan,-29.59% compared with the same period last year; realized net profit of 223 million yuan, compared with-54.12% of the same period last year; realized income of 545 million yuan,-20.95% of the same period last year; and realized net profit of 121 million yuan,-46.54% of the same period last year. The company is the leader of special MLCC and is expected to benefit from demand repair in aerospace and other fields; at the same time, the research and development of highly reliable new products such as filters and microwave modules and the expansion of new energy fields are steadily advancing, which is expected to open up diversified growth points. Taking into account the downstream order rhythm fluctuations and price reduction pressure, downgraded to "overweight" rating.

23H1 performance is-54.12% year-on-year, and weaker downstream demand affects performance. Affected by the weakening of the short-term prosperity of the downstream market and the decline in customer demand for self-production and agency business, the company's 23H1 achieved an income of 980 million yuan,-29.59% compared with the same period last year, and a net profit of 223 million yuan,-54.12% compared with the same period last year. Or due to the pressure of price reduction downstream, 23H1's gross profit margin was-8.48pcts to 46.47% compared with the same period last year. On the expense side, 23H1's financial expenses are-49.13% to 2 million yuan compared with the same period last year, R & D expenses are from-5.43% to 47 million yuan year-on-year, management expenses are from + 6.75% to 58 million yuan, and sales expenses are from + 8.35% to 42 million yuan compared with the same period last year, resulting in an expense rate of + 4.66pcts to 15.29% during the 23H1 period. Combined with the above effects, the company's 23H1 net interest rate is-12.36pcts to 22.54% compared with the same period last year, and its profitability is under pressure. In the single quarter, the company's 23Q2 realized income of 545 million yuan, year-on-year-20.95%; net profit of 121 million yuan, year-on-year; and deduction of non-return net profit of 121 million yuan,-45.99% of the same period last year.

Self-produced MLCC and agency business are under pressure, and other electronic components are outstanding. Affected by the weak customer demand for the company's core product ceramic dielectric capacitors, the company's 23H1 self-produced business achieved revenue of 566 million yuan,-31.31% compared with the same period last year, and the income of the top five customers of the self-produced business was-34.19% to 402 million yuan compared with the same period last year, accounting for the proportion of self-produced business income-3.11pcts to 71.02%. The self-produced business of dismantling the branch by category: 1) the income of ceramic capacitors is 502 million yuan, compared with the same period last year; 2) the income of the filter is 12 million yuan, compared with the same period last year; 3) the income of other electronic components is 52 million yuan, which is + 225.35% compared with the same period last year. As some core customers are greatly affected by the external market, expectations for future demand continue to decrease. The income of the agency business is 412 million yuan,-26.88% compared with the same period last year. The income of the top five customers is-40.3% to 233 million yuan compared with the same period last year, accounting for the proportion of agency business income-12.73pcts to 56.64%. The demand of customers in areas such as new energy vehicles and high-voltage frequency converters expanded by 23H1 is growing rapidly, but it is difficult to offset the reduction in demand from some core customers in the short term.

The increase in inventory indicates the active preparation of goods and production, and the cash flow situation is expected to improve. At the end of 23H1, the inventory size of the company was + 37.54% to 794 million yuan compared with the same period last year, including raw materials from + 54.90% to 320 million yuan, products from + 37.89% to 49 million yuan, and inventory goods from + 27.38% to 419 million yuan. Considering that the company's self-production business is mainly based on sales, with the gradual delivery of inventory goods, the performance is expected to increase in the second half of the year. At the end of 23H1, the company's accounts receivable ranged from-4.39% to 1.659 billion yuan compared with the same period last year; affected by the increase in commercial bills due to 23H1, the net operating cash flow ranged from-70.69% to 20 million yuan compared with the same period last year. Taking into account the lower risk that the military should recover the money, and that the company should collect most of the money in the fourth quarter, the follow-up cash flow is expected to improve.

Since the continuous expansion of the product category, the car specification-level products are ready to go. The company continues to strengthen independent research and development, in the field of high reliability, 23H1 has made steady progress in the series research and development of ceramic dielectric capacitors, filters, microwave modules, microcontrollers and microprocessors, ceramic circuit boards, ceramic shells and other products; in the civil field, by the end of 23H1, the company has completed part of the research and development and finalization of high-power RF microwave ceramic capacitors and packaging shell products, realizing small batch supply. Has completed the vehicle specification level multi-layer ceramic capacitor representative specification series research and development, product certification and customer certification, and achieve small batch supply. In the agency business, the company is actively promoting the development of automotive electronics, new energy, artificial intelligence, health care and other emerging industries. We believe that the category expansion of highly reliable areas and the field of new energy are expected to open up multiple growth points of the company and further enhance performance stability.

Risk factors: increasing competition in the industry; substantial price reduction risk of self-produced high reliable products; repair of high reliable downstream demand is not as expected; R & D and promotion of highly reliable new products is not as expected; the expansion of new energy field is not as expected.

Profit forecast, valuation and rating: the company is the leader of special MLCC and is expected to benefit from demand repair in aerospace and other areas; at the same time, the research and development of highly reliable new products such as filters and microwave modules and the development of new energy are making steady progress, which is expected to open up diversified growth points. Combined with the operating situation of the company in the first half of the year, taking into account the uncertainty of the downstream order rhythm and the pressure of price reduction in the industry, the company's net profit forecast for 2023max in 2024 is reduced to 55 million yuan, and the net profit for 2025 is forecast to be 930 million yuan, corresponding to the annual EPS forecast of 2.35 pound in 2023-24-25, and the current price corresponding to PE is 26max 19max 15x. Torch Electronics, New Ray Energy and Aerospace Appliances are selected as comparable companies, and the average Wind of comparable companies is expected to be 22x in 2024.

Taking into account the company's leading position in the military MLCC and the strong downstream demand for repair expectations, give the company 2024 25xPE, the target market value of about 18.5 billion yuan, the target price of 80 yuan. Taking into account the downstream order rhythm fluctuations and price reduction pressure, downgraded to "overweight" rating.