Main points of investment:

Q3 revenue performance is in line with expectations, performance growth is lower than expected. On October 26, 2022, the company announced that the revenue in the first three quarters was 2.498 billion yuan, an increase of 1.71% over the same period last year. The net profit belonging to shareholders of listed companies was 250 million yuan, down 4.56% from the same period last year. The net profit after deducting non-return was 210 million yuan, down 12.24% from the same period last year. Among them, Q3 achieved 751 million yuan in operating income in the single quarter, down 22.71% from the same period last year, 70 million yuan in net profit, down 32.23% from the same period last year, and 62 million yuan in net profit deducted from the same period last year, down 36.34% from the same period last year. The double-digit decline in revenue and performance over the same period last year is expected to be mainly affected by the shutdown of Jinyuan Industrial Q3 for several days under the background of 2022Q2 bulk price correction. The company's Q3 overall revenue performance is in line with our previous expectations in the outlook for the third quarterly report, and the performance side is lower than expected.

The production and sales of air ice compressor parts are weak. According to industry online data, a total of 177 million rotary compressors were produced in the first three quarters of 2022, down 2.6% from the same period last year, with sales of 179 million units, 2.4% lower than the same period last year. Q3 respectively achieved production and sales of 51.43 million units / 51.008 million units in a single quarter, down 3.7% and 3.4% respectively Among them, with the relief of high temperature in many places and the end of the cold year, the production and sales of rotary compressors fell 0.1% and 4.9% respectively in September compared with the same period last year, and the growth rate fell back to negative growth. Affected by the high base number in the same period last year, the total sales of refrigerator fully sealed piston compressors reached 156.19 million units from January to August in 2022, down 10.0% from the same period last year.

Q3 profitability improved month-on-month. In the first three quarters of 2022, the company achieved a gross profit margin of 18.47%, down 1.34 pcts from the same period last year, significantly narrowing the decline. Q3 achieved a gross profit margin of 20.14% in a single quarter, an increase of 3.03 pcts over the same period last year and 3.31 pcts over the same period last year. In terms of the period expense rate, the sales expense rate in the first three quarters of the company reached 0.89%, a slight increase of 0.04 pcts over the same period last year, the management expense rate increased by 0.60 cpts to 4.26%, and the financial expense rate increased by 0.79 pcts to 1.30% compared with the same period last year, which is expected to be mainly due to the increase in interest on convertible bonds. Finally, the company recorded a net interest rate of 9.42% in the first three quarters, down 1.03 pcts from the same period last year. Among them, Q3 achieved a net sales interest rate of 8.51% in a single quarter, a year-on-year decline of 1.62 pcts and a slight increase of 0.06 pcts compared with the previous quarter.

Maintain a "buy" investment rating. Considering that Q3 pig iron business has been shut down for many days, which has a certain drag on the company's overall revenue and profit, we downgrade the company's profit forecast. It is expected that the company will achieve a net profit of 3.55pm 4.87pm in 2022-2024, respectively, (the previous value is 5.95801 million yuan), up 8.3%, 37.1% and 35.8% respectively over the same period last year. The corresponding current price-to-earnings ratios are 16 times, 12 times and 9 times respectively. At present, the company's pig iron business has been reopened, production has gradually returned to normal, with the release of investment project capacity, the company's overall business situation is expected to continue to improve, maintain the "buy" investment rating.

Risk hint: exchange rate fluctuation risk; raw material price fluctuation risk.