The large die-casting machine business of LK Technology ("LK Tech", or the "Company") maintained rapid growth; long-term growth logic is solid. In 1HFY23, the growth rate of large die-casting machines (1,000 t-5,000 t) exceeded 40%, and the marginal ratio was around 30%-35%; the growth rate of super-large die-casting machines (>6,000 t) exceeded 50%, and the marginal ratio exceeded 40%; and revenue from large and super-large die-casting machines accounted for more than 70% of revenue of the die-casting machine business. We believe that as the Company’s large die-casting machine business will continue to grow in the future, the impact from small die-casting machine business and injection molding machine business on the Company will continue to decrease; we expect the Company's gross profit margin to continue to improve. With the extremely low penetration rate of single-piece die-casting solution, China's new energy vehicle industry will maintain strong demand for large and super-large die-casting machines in the next few years; the Company's long-term growth logic is solid.
　　The Company's traditional business may recover alongside economic recovery, and the Company's short-term performance is expected to improve. Revenue and gross profit of the Company's traditional businesses such as injection molding machines and small die-casting machines experienced significant decline in 1HFY23.
　　However, with adjustments in China's macro policy and the increase of capital expenditure of the manufacturing industry, overall downstream demand will gradually improve. Revenue and gross profit of the injection molding machine business and small die-casting machine business in 2HFY23 may increase, improving the Company’s short-term performance.
　　Performance of the CNC machine tool business has been outstanding and will expand into new growth space. The Company's CNC machine business revenue in 1HFY23 was HK$150 million (+52.8%), and operating profit margin was 11.9% (+17.4 ppts). In September, the Company released the MCG5 five-axis gantry machine to optimize die-casting parts processing. The Company's five-axis gantry machines, supporting equipment for super-large die-casting machines, will also benefit from the increase in the penetration rate of single-piece die-casting solutions, and will maintain rapid growth together with super-large die-casting machines.
　　Investment suggestion: We believe that the long-term growth logic of LK Tech is solid, and short-term performance is to improve. We maintain the Company's rating as "Buy", and maintain TP of HK$11.90. We forecast earnings per share in FY23/ FY24/ FY25 to be HK$0.437, HK$0.596, and HK$0.773, respectively. Our TP represents 27.3x/ 20.0x/ 15.4x FY23-FY25 PE ratio.