Incidents:

On October 27, the company released its report for the third quarter of 2022: in the first three quarters of 2022, the company achieved operating income of 519 million yuan, +72.80% year on year; achieved net profit of 320 million yuan, +120.84% year on year; the weighted average return on net assets was 11.39%, a decrease of 0.28 percentage points over the previous year.

The gross profit margin on sales was 74.28%, down 4.42 percentage points from the previous year; the net profit margin on sales was 61.69%, up 13.42 percentage points from the previous year.

Among them, Q3 2022 achieved revenue of 204 million yuan, +105.55% year on year, +43.66% month on month; net profit returned to the mother was 136 million yuan, +165.06% year on year, +44.68% month on month; the weighted average return on net assets was 3.82%, down 0.31 percentage points from the previous year. The gross profit margin on sales was 77.97%, a decrease of 0.32 percentage points over the previous year and an increase of 2.90 percentage points over the previous year; the net profit margin on sales was 66.44%, an increase of 14.94 percentage points over the previous year and an increase of 0.38 percentage points over the previous year.

Key points of investment:

Guimu's net profit increased year-on-year, and profitability increased markedly

Large orders of 2,169 billion yuan progressed steadily, helping to continue to release performance. According to the company announcement, the execution of the large order of 2,169 million yuan signed by the company with customer A began in July of this year.

The company achieved operating income of 519 million yuan in the first three quarters, +72.80% year on year, and achieved net profit attributable to shareholders of listed companies of 320 million yuan, an increase of 120.84% over the previous year. Among them, the third quarter achieved operating income of 204 million yuan, +105.55% year on year, and net profit attributable to shareholders of listed companies was 136 million yuan, an increase of 165.06% over the previous year. The contract period for big orders is until the end of 2023. Currently, production capacity is gradually climbing, and construction of the third phase of the project is speeding up, and it is expected that part of the production capacity will be put into operation ahead of schedule. The big contract is expected to be completed early.

The scale effect is compounded by the ability to manage and control expenses, and profitability has been greatly improved. The company's gross profit margin for Q3 2022 was 77.97%, a decrease of 0.32 percentage points over the previous year, and the net sales profit margin was 66.44%, an increase of 14.94 percentage points over the previous year.

The company closely focuses on the two core tasks of production and supply and the construction of the third phase of the project, and actively promotes various tasks such as production, operation and management improvement. Currently, the company is facing the double pressure of securing delivery tasks and the construction of the third phase of the project. Scientific research, production, construction and development go hand in hand. The tasks are superimposed. 95% of civil engineering construction has been completed, and the equipment order contract rate has exceeded 95%. The company's operations are progressing smoothly to ensure the steady and far-reaching development of the company.

Projects under construction are progressing at an accelerated pace, and the quality and quantity of high-end products are guaranteed

The company's production expansion project progressed steadily. According to the announcement, the company's IPO fundraising project, the kiloton line project was put into operation at the end of 2021, and production capacity is now gradually being released. It is expected that the third phase of the fixed increase project will be completed by the end of this year — the installation of the first ZT7+ZT9 production line in the high-performance carbon fiber and fabric product project. The commissioning and installation and commissioning of the second ZT7+ZT8 production line will be completed early next year. These two lines will greatly guarantee supply to the existing market, and the commissioning of the third high-mode carbon fiber production line will be completed within next year.

The company's overall program is based on high-quality and large-scale production expansion. The middle and high-end market is expected to have a supply capacity of no less than 1000 tons/year by the end of 2023, and the supply capacity of no less than 2,500 tons/year by 2025 is expected. Using high-quality and sufficient supply as a starting point, the first is to form large-scale production to resolve the balance between supply and demand, and the other is for next-generation products to be applied on a large scale by new customers while maintaining leadership in quality and quantity.

Equity incentives motivate employees and demonstrate confidence in the company's development

On October 13, 2022, the company released the 2022 Restricted Stock Incentive Plan (draft). It intends to grant the number of Class II restricted shares to 13 incentive targets (not including shareholders or actual controllers holding 5% or more), including senior management of the company, middle management and business cadres, accounting for 0.25% of the company's total share capital. Among them, 873,400 restricted shares were granted for the first time, accounting for 0.20% of the company's total share capital, reserving 218,400 restricted shares, initial and reserved restricted shares The grant price is 23.36 yuan/share.

The first assessment year was granted for the four fiscal years from 2022 to 2025. The assessment is once for each fiscal year. Based on 2021 revenue and net profit, the target value for the company's revenue growth rate for 2022/2023/2024/2024/2025 is not less than 70%/250%/300%/380%, and the net profit growth target value is not less than 115%/250%/350%/470%. If each period exactly meets the assessment goals, it is estimated that the revenue growth rate from 2022 to 2025 will be 70%/106%/14%/20%, and the net profit growth rate will be 115%/63%/29%/27% year over year.

Profit forecasts and investment ratings estimate that the company's net profit for 2022-2024 will be 4.75, 712, and 860 million yuan respectively. Corresponding PE is 50.40, 33.65, and 27.86 respectively, covered for the first time, giving a “buy” rating.

Risks suggest that the progress of project commissioning fell short of expectations, large fluctuations in raw material prices, sharp declines in chemical prices, force majeure such as domestic and foreign epidemics, turbulence in the international situation, and drastic changes in industry policies.