This report is read as follows:

The company's results in the first three quarters of 2023 were slightly lower than expected, and the downward price of oriented silicon steel was a drag on the company's earnings. The company's fund-raising projects continue to move forward and are expected to bring continuous production growth to the company in the second half of 23 years.

Main points of investment:

Maintain the "overweight" rating. In the first three quarters of 2023, the company achieved revenue of 1.969 billion, up 12.9% from the same period last year, and achieved a net profit of 216 million, up 6.7% from the same period last year. Taking into account the decline in the price of oriented silicon steel, the net profit of the company in 2023-25 is estimated to be 305pm 406pm (the original 402pm 527max 672 million yuan), corresponding to EPS 0.92 pound 1.22pm 1.57 yuan. Taking into account the decline in the valuation level of companies in the same industry, refer to similar companies, give the company a valuation of 20 times PE in 2023, lower the company's target price to 18.4 yuan (formerly 24.2 yuan), and maintain the "overweight" rating.

Buyback shows the confidence of the company. The company announces that it intends to use not less than 50 million yuan and not more than 100 million yuan to buy back the company's shares for the implementation of employee stock ownership plans or equity incentives. We believe that this buyback reflects the management's confidence in the future development of the company and recognition of the value of the company. If the equity incentive is implemented, the incentive mechanism of the company will be further improved, which is conducive to the long-term development of the company.

The strategic concentration is high, and the decline in the price of oriented silicon steel is a drag on profits. The company announced that it intends to increase investment in transformer and core projects by 4488 and 72.67 million yuan respectively, raise the transformer project from the original plan of 11.204 million kVA to 1490.4 million kVA, and increase the core processing capacity of the core project from 30,000 tons / year to 60,000 tons / year. The decline in the price of oriented silicon steel is greater than that of cost, and the gross profit margin of oriented silicon steel decreases, which is a drag on the profit of the company.

The output of oriented silicon steel will continue to be released. The company's 80,000 tons of oriented silicon steel project was partially put into production in the first half of 2023, which is expected to bring an increase of 20,000 to 30,000 tons in 2023. The project is expected to go into full production in June 2024 and is expected to bring an increase of 50,000 to 60,000 tons in 2024. The company's oriented silicon steel output will gradually increase with the landing of the project.

Risk hint: the progress of the fundraising project is not as expected; the risk of a sharp decline in the price of oriented silicon steel.