Times Electric's （the "Company"） 1H23 results were in line with our expectations. The Company achieved strong growth in 1H23, basically in line with our expectations. The Company's revenue in 1H23 was RMB8.57 billion, an increase of 31.3% YoY, mainly benefiting from the rapid growth of emerging equipment business. In 1H23, the Company achieved revenue of RMB3.75 billion from emerging equipment business, representing an increase of 105.1% YoY. We maintain our previous EPS forecasts for 2023-2025, which were RMB2.056/ RMB2.381/ RMB2.789, respectively. We maintain “Buy” and the previous TP of HK$41.95. Our TP represents 18.0x/ 15.5x/ 13.2x 2023-2025 PE ratio and 1.4x 2023 PB ratio.
　　Overall gross profit margin of the Company declined. In 1H23, gross profit margin of the Company was 31.1%, representing a decrease of 3.1 ppts YoY, mainly due to the change in revenue structure. Gross profit margin of emerging equipment business was less than rail transit business. As the proportion of emerging equipment business increases, the Company's overall gross profit margin has declined. However, gross profit margin of the Company's emerging equipment business increased by 0.9 ppts to 23.6% in 1H23. We believe that gross profit margin of the Company’s emerging equipment business will continue to improve as the market share of the Company is increasing.
　　We expect that the Company will continue to grow its emerging equipment business in the future. The Company is very competitive in the semiconductor field. The Company’s insulated gate bipolar transistor （IGBT） products and silicon carbide semiconductor devices （SiC） are in short supply. We believe that with capacity utilization and yield rate growth, the Company may further increase its production capacity. We believe that with the expansion of the Company's production capacity and the enhancement of the Company's technological advantages, the Company will continue to expand its market share in the IGBT and SiC industry.
　　We believe that the Company's rail transit business will further improve in 2H23. China’s railway passenger traffic has been recovering significantly. We believe that with the significant increase in travel demand, China's demand for rail transit equipment will continue to improve.
　　Risks: Intensified competition in the industry; insufficient industry demand.