Event: on October 27, the company released its quarterly report for 2022, with realized income (519 million yuan, + 72.80%), net profit (320 million yuan, + 120.84%), realized income in the third quarter (204 million yuan, + 105.55%), and net profit (136 million yuan, + 165.11%).

The performance increased significantly and the net interest rate continued to rise. During the reporting period, the company took the production guarantee and the construction of the third phase of the project as the main starting point, and actively promoted the orderly development of operation and management. In the first three quarters, the company achieved operating income of 519 million yuan, an increase of 72.80% over the same period last year, and a net profit of 320 million yuan, an increase of 120.84% over the same period last year, mainly due to the strong growth of customer demand and the reasonable matching of the company's production capacity according to demand. In terms of profitability, the company's gross profit margin in the first three quarters was 74.28%, a year-on-year decline of 4.42pct, due to depreciation charges included in operating costs after the production line was put into production. The net interest rate in the first three quarters was 61.69%, which greatly improved 13.42pct compared with the same period last year, which was mainly related to the decrease in the expense rate from 23.87pct to 12.46%. Among them, the management expense rate decreased 18.17pct compared with the same period last year, mainly due to the production of the kiloton line, the corresponding depreciation expense management expense was transferred to the production cost, and the R & D expense rate decreased 4.15pct compared with the same period last year. The R & D project is in the verification stage, and the expense is relatively reduced. The rate of financial expenses decreased by 1.54pct. In addition, the company's credit impairment loss in the first three quarters was-2.22 million, down 180.99% from the same period last year, mainly due to the decrease in the provision for bad debts of receivables during the reporting period.

From a quarterly point of view, Q1-Q3 achieved revenue of 1.73 million yuan, respectively, and Q3 increased by 43.66 percent compared with the previous quarter. The net profit of return to the mother was 0.91 shock 0.94 billion yuan, Q3 increased by 44.68%, and revenue and net profit increased significantly in the third quarter, which may be related to the continuous increase in production capacity and the company's improvement of production organization efficiency by improving the conversion rate of raw silk and the intact rate of equipment. In the first three quarters, the gross profit margin was 69.25%, 75.07%, 77.97% respectively, showing a steady growth trend, or reflecting the scale effect with the increase of the company's production capacity. In terms of net interest rate, the net interest rate in the first three quarters was 52.47%, 66.06%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44%, 66.44% and 66.44%, respectively.

Multiple items on the balance sheet indicate strong downstream demand. Inventory in the first three quarters increased by 22.99% compared with the beginning of the period, indicating that the company has sufficient downstream orders and is actively preparing production and organizing production. At the same time, accounts receivable at the end of the third quarter increased by 183.68% over the beginning of the period, and increased by 41.04% over the end of the second quarter. After the revenue is confirmed, it is expected to be cashed to the revenue side to thicken the company's performance. In addition, the number of projects under construction increased by 646.43% over the beginning of the period, reflecting that the company's third phase of the project is under construction. The net operating cash flow in the first three quarters decreased by 62.63% compared with the beginning of the period, mainly due to the decrease in cash received during the reporting period and the increase in materials, labor and other expenses paid.

The company is actively raising, investing and expanding production to help the future performance growth. The company originally had only one 150T / a (12K) or 50T / a (3K) high-performance carbon fiber production line, then raised 242 million yuan through IPO to carry out 1000 tons / year domestic T700 carbon fiber expansion project, and completed the equivalence verification in September 2021 and normal production in 2022. The company plans to build a production line with an annual output of 1500 tons of high-performance carbon fiber and fabric products. At the end of 2022Q3, the civil engineering construction of this project has been completed by 95%, and the equipment order contract signing rate has exceeded 95%. The company is expected to complete the final assembly of an oxidation carbonization line and a raw silk line by the end of 2022. Taking into account the current downstream demand is relatively full, in the context of the company's rising production capacity, the performance side is expected to continue to realize the high boom.

Equity incentives hit the ground, demonstrating long-term growth confidence. On October 13, the company issued an equity incentive plan (draft), which intends to grant 1.092 million restricted shares to the incentive target, of which 873000 shares will be awarded for the first time. The incentive target is 13 people, including senior managers, middle managers and business backbones, with a grant price of 23.36 yuan per share. The equity incentive plan sets two conditions: target value and trigger value to evaluate the company's performance. according to the target conditions, the company's return net profit from 2022 to 2025 is 4.33pm 7.04pm, 1.147 billion RMB, an increase of 115%, 63%, 29%, 27% and a compound growth rate of 38.36%. With reference to the trigger conditions, the company's return net profit from 2022 to 2025 was 4.13, 674, 865, 087 million yuan respectively, an increase of 105%, 63%, 28%, 26% and a compound growth rate of 38.07%. This equity incentive is expected to have a long-term incentive effect on the company's performance growth, demonstrating the company's confidence in the persistence of medium-and long-term performance.

Investment suggestion: the company is a leading domestic supplier of high-performance carbon fiber. With the accelerated release of downstream aerospace demand, the company's carbon fiber products are expected to benefit from the core. In addition, the company is actively raising investment to expand production, the layout of the aerospace field, with the orderly production of investment projects, the company's future performance is expected to further grow. We expect the company's return net profit from 2022 to 2024 to be 4.5,6.9 and 850 million yuan respectively, with corresponding valuations of 55X, 35X and 29X respectively, maintaining the "buy-A" rating.

Risk tips: fund-raising project production is not as expected; customer development progress is not as expected; product price decline risk; customer relative concentration of risk.