From January to September 2020, the company achieved revenue of 2.321 billion yuan,-7.3% compared with the same period last year, and net profit of 149 million yuan,-15.4% of the same period last year. Among them, the revenue in the third quarter was 852 million yuan, + 17.9% compared with the same period last year, and the net profit was 73 million yuan, + 56.2% compared with the same period last year. At the same time, the company expects full-year net profit of 1.7-210 million yuan, compared with the same period last year-3.6% to 19.1%. The company is the leader of domestic vehicle air-conditioning system, which is currently at the bottom of the business cycle, with continuous optimization of business structure and rapid recovery of profits. Maintain 2020cm 21 / 22 EPS forecast 0.31 pound 0.42 RMB 0.52 yuan, maintain the "buy" rating.

The results in the third quarter exceeded expectations and profits rebounded quickly. In the first three quarters of 2020, the company achieved revenue of 2.321 billion yuan,-7.3% compared with the same period last year, and net profit of 149 million yuan,-15.4% of the same period last year. Among them, the company achieved a single-quarter revenue of 852 million yuan in the third quarter, + 17.9% compared with the same period last year, and realized a net profit of 73 million yuan, + 56.2% compared with the same period last year. The company's revenue and profit end have declined significantly since 2020Q1 was affected by the epidemic, but with the resumption of domestic work and production of 2020Q2 and 2020Q3, downstream customers gradually recovered, revenue and profit side improved significantly for two consecutive quarters, and profits rebounded rapidly. At the same time, the company expects full-year net profit of 1.7-210 million yuan,-3.6% to 19.1% of the same period last year.

The company's gross profit margin reached the highest level in nearly five years, and the expense rate rose year-on-year. 2020Q3, the company's gross profit margin is 30.8%, year-on-year + 3.9pcts, month-on-month + 4.1pcts, gross profit margin increased significantly, the second highest in the past five years; mainly due to the sharp increase in air-conditioning sales of large and medium-sized passenger cars and the high gross profit margin of some orders. The company expense rate is 21.2%, year-on-year + 0.7pct, month-on-month + 4.5pcts, of which the sales expense rate is 10.8%, year-on-year + 2.3pcts, month-on-month + 2.3pcts, mainly due to the large amount of prepaid after-sales service fees for large and medium-sized buses; the management expense rate is 4.6%, year-on-year-1.6pcts, month-on-month + 0.4 pct; R & D expense rate is 5.4%, year-on-year-1.1pcts, month-on-month + 1pct. It is mainly due to the epidemic, and the related expenses have been reduced. The company's financial expense rate is 0.3%, year-on-year + 1pct, month-on-month + 0.7pct, low and stable.

The customer structure is optimized, and the management has hit bottom. Since 2019, the company has adhered to the business strategy of both passengers and businessmen, focusing on the development of commercial vehicles, especially construction machinery air-conditioning business, and the proportion of air-conditioning business of commercial vehicles has gradually increased.

At present, the company's commercial vehicle customers have Sany, Xugong, Futian and Shaanxi Automobile and other advanced construction machinery manufacturers. With high-quality product quality and fast service response, the company won the best cooperation award of Sany Group Strategic Alliance and the excellent supplier of Sany pump. In terms of passenger cars, the company mainly supplies condensers, air-conditioning boxes and other products such as water-cooled plates to customers, the customer structure is constantly optimized, and the company continues to eliminate lower-end passenger car customers and gradually expand into high-quality independent and joint venture brand customers. At present, the main customers of the company's passenger car business include Jianghuai, Changan, SAIC GM Wuling, SAIC passenger cars, etc.; it is the supplier of condenser assembly, air conditioning box assembly and heater assembly of Wuling Hongguang MINIEV.

Continuous investment in R & D and rapid expansion of new business. Since 2014, the company's annual R & D expenditure has been more than 150 million yuan; in terms of patents, the company is the drafting unit of industry standards for automotive air-conditioning products, and the vehicle air-conditioning R & D technology is ahead of its domestic counterparts; as of the end of June 2020, the company has 540 national patents. And the company has Shanghai Songzhi Experimental Center and Jianghuai Songzhi Experimental Center two nationally recognized qualified laboratories.

The company invested 150 million yuan in 2018 to build an international advanced ring mold wind tunnel laboratory to speed up the cooperative development with a number of vehicle factories. The company is a leading enterprise in the field of large and medium-sized bus air-conditioning, with iterative air-conditioning products, leading product technology and high share stability. The new business of battery thermal management is also air-conditioning coordination, which continues to provide increments. In terms of cold chain business, after the acquisition of Lumikko, the company localized its technology and products, and solidly promoted the business of refrigeration units, including the transportation of products such as drugs, fruits and vegetables, fully benefiting from the rapid growth of cold chain transport demand after the epidemic.

Risk factors: the prosperity of the automotive industry is declining; the progress of product research and development is not as expected; the expansion of new products and new customers is not as expected.

Investment suggestion: the company is the leader of domestic vehicle air-conditioning system, and its operation is constantly improving. The passenger business of car thermal management is developed at the same time, the penetration of commercial vehicles and construction machinery air conditioners to Sany and Xugong continues to increase, breaking through Futian and Shaanxi Automobile, and the customer structure of passenger car business is optimized and Changan Ford orders are obtained. and through the acquisition of Jingbin Ocean to further break through the supply chain of Volkswagen and Honda The company is the leader of large and medium-sized bus air conditioners, accounting for more than 30% of the market in 2019, and is expected to benefit from the recovery of bus scenery and the sales growth brought about by the upgrading of new energy thermal management systems. The company is currently at the bottom of the business cycle, the business structure continues to be optimized, and profits pick up rapidly. Maintain the annual EPS forecast of 0.31 quarter in 2020-21-22 and maintain the "buy" rating.