Event

On October 25, 2022, the company released the third quarterly report of 2022, 1Q-3Q22 achieved operating income of 1.28 billion yuan, an increase of 92.15% over the same period last year, and a net profit of 189 million yuan, an increase of 154.7% over the same period last year. Of this total, 3Q22 achieved an operating income of 621 million yuan, an increase of 124.2% over the same period last year, and a net profit of 111 million yuan, an increase of 192.56% over the same period last year.

Business analysis

The can-making equipment is booming, and the company's revenue has increased significantly. At present, the prosperity of the can-making equipment industry is high. On the one hand, due to the "plastic restriction orders" issued one after another in Europe and the United States, China and other countries, the demand for cans instead of plastic packaging continues to increase; on the one hand, due to the increased demand for canned food affected by the overseas epidemic, canning equipment has entered a state that supply exceeds demand. The company has benefited from the high prosperity of the industry and achieved high income growth.

The scale effect appears, and the company's profitability picks up. 3Q22 achieved a gross profit margin of 31.7%, a year-on-year reduction of 9.55pcts, a month-on-month increase of 4.89pcts; a net profit margin of 17.16%, an increase of 4.33pcts, a month-on-month increase of 7.90pcts, and a pick-up in profitability. We believe that the month-on-month increase in gross profit margin is mainly due to the higher gross profit margin of orders confirmed by the company 3Q22, and the increase in net profit margin also benefits from the decrease in the rate of expenses due to the scale effect of the company. The rate of 3Q22 sales + management expenses is 7.73%, which is lower than the same period last year with a decrease of 4.18pcts and 1.81pcts compared with the previous year.

The five major production bases in Changzhou and Sheng are gradually entering the production state, and the battery shell business is expected to accelerate its expansion:

Xinxiang Shengda (steel column): 1H22 realized revenue of 37 million yuan. 4680 shells are expected to gradually enter commercial production.

Anhui Sixiang (aluminum cylinder): 1H22 realized revenue of 16 million yuan. The second / third production line will be gradually put into production in the second half of the year, and the income scale will be further increased.

Square shell: the equity transfer of Changzhou and Sheng has been completed, and the five major production bases have gradually entered the production state. At present, the company has initially completed the optimization of an experimental production line, doubling the production efficiency from the original 20 / min. At the same time, the company has fixed additional projects on the ground, and the construction of Changzhou Laisheng square battery shell project is expected to be accelerated.

Profit forecast and investment suggestion

From 22 to 24, the company is expected to achieve a net profit of 2.25 USD 334,515 million respectively, and the corresponding PE is 65X/44X/28X respectively, taking into account the space of the new energy battery shell industry. At the same time, the volume of the battery shell business is about to be released, and the "buy" rating is maintained.

Risk hint

The demand for can-making equipment is lower than expected, the development of battery shell business is not as expected, and the RMB exchange rate fluctuates.