Performance review
3Q22's performance slightly exceeded our expectations.
The company announced 3Q22 results: revenue in the first three quarters was 213 million yuan, + 24.8% compared with the same period last year, and net profit was 51 million yuan, + 33.5% compared with the same period last year. In a single quarter, 3Q22 realized revenue of 98 million yuan, + 35.4% year-on-year, and net profit of 22 million yuan, + 45.4% year-on-year. Due to the delayed arrival of some orders in the second quarter to the third quarter, while the downstream bidding of 3Q22 has picked up, the company's 3Q22 performance has grown rapidly compared with the same period last year, slightly exceeding our expectations.
Trend of development
Get rid of the impact of the epidemic and return to rapid growth and marginal improvement in profitability. The company's 3Q22 achieved 98 million yuan in revenue in a single quarter (+ 35% compared with the same period last year). On the one hand, we judge that on the one hand, orders delayed by 1H22 affected by the epidemic are confirmed and accepted in 3Q22. On the other hand, as the impact of the epidemic gradually subsided, the bidding rhythm of the company's downstream medium and large group coal mines resumed, the company's advantageous business such as integrated management and control platform and intelligent geological guarantee continued to harvest orders, while the company's MES products for downstream intelligent coal preparation plants also achieved breakthrough growth. In terms of profit margin, the company's 3Q22 single-quarter gross profit margin is from + 1.8ppt to 54.7% compared with the same period last year, and the net profit margin is from + 1.6ppt to 22.9% compared with the same period last year. The profitability has improved, which is mainly due to the optimization of the company's revenue structure. The proportion of total income of industrial Internet of things applications with relatively low gross profit margin has declined.
The prosperity of the coal industry continues, and the downstream orders are full and positive throughout the year. We estimate that the growth rate of capital expenditure in the coal industry downstream of 2Q22 is 51% year on year. Considering the high domestic coal price of 1-3Q22, we judge that the prosperity of capital expenditure in 2H22 coal industry is expected to continue. Combined with the requirements of intelligent and rigid construction of coal, we judge that the company's intelligent mine related products are expected to meet strong demand in 2H22. According to the public bidding information, 3Q22 Company has won a number of large orders for intelligent construction of coal mines at the level of more than 3 million yuan, involving the company's advantage areas such as intelligent management and control platform, GIS map construction and so on, including the intelligent upgrade project of Shengli Energy ground production centralized control system (winning bid amount of 33.91 million yuan) and the GIS one map construction project of Anhui Northern Coal and Power Group (winning bid amount of 7.69 million yuan). In the construction of intelligent coal preparation plant, the company won the bid for the intelligent coal preparation plant management and control platform and 3D visualization system project of Shaanxi Huangling No. 1 Coal Mine (winning bid amount of 14.88 million yuan). As of 3Q22's contract debt of 27 million yuan (a substantial increase over the same period of 3Q21), verified that the company's downstream orders are full. We are optimistic that with abundant on-hand orders, the company is expected to achieve more than 30% revenue growth for the whole year.
Profit forecast and valuation
Taking into account the impact of the epidemic on the performance of 1H22, we lowered our revenue forecast of 3.5% for 2023 to RMB 385,000,000 for 2023, and lowered the net profit forecast for 2022 for 2023 of 4.4% to RMB 0.87 million. We maintain long soft technology outperform industry rating, taking into account the downside of the valuation center of the industry, we cut our target price by 18% to 50 yuan (based on 30 times 2023 price-to-earnings ratio), which is 40.8% higher than the current share price. The current share price corresponds to a price-to-earnings ratio of 29.0 pounds 21.5 times 2022 pounds 2023.
Risk.
The spread of the epidemic affects the expansion and implementation of orders; the progress of policy landing is not as expected; and the competition in the industry is intensified.