Event 1: the company releases its third quarter report for 2022. 2022Q1-Q3 realized income of 458 million yuan (+ 17.56%), net profit of 96 million yuan (+ 105.16%), net profit of 75 million yuan (+ 71.77%), income of 170 million yuan (+ 23.90%), net profit of 54 million yuan (+ 221.36%) and net profit of 38 million yuan (+ 136.85%). The company's performance exceeded expectations, mainly due to the shortage of production capacity and supply in Europe under the influence of the war between Russia and Ukraine. The company's export revenue reached 146 million yuan in the first three quarters of 2022, an increase of 28.15% over the whole of 2021. At the same time, the market share accelerated with the acquisition of Maitsen in the domestic market. In addition, the net profit growth rate of home return is higher than that of non-return net profit, which is mainly due to the impact of investment income (31 million yuan in the first three quarters and 24 million yuan in Q3 alone), which will be included in the income and profit at the consolidated statement level, which is sustainable.

Event 2: the company released an increase plan for 2022. The company plans to raise no more than 608 million yuan, and plans to invest 123 million yuan in the construction of high-speed steel bimetal band saw blade production line project, 112 million yuan in cemented carbide band saw blade production line project, 242 million yuan in new energy power and storage power production base project (photovoltaic inverter + photovoltaic optimizer + energy storage pcs), 30 million yuan in R & D center project, and 180 million yuan in supplementary liquidity.

Sawing business: under the background of the Russian-Ukrainian war, the rapid growth of exports, the domestic acquisition of Maitsen + will increase production capacity, further consolidate the leading position. The trend of domestic substitution in the sawing industry is obvious. Domestic manufacturers rely on high-quality products, localized services and cost-effective advantages to create strong competitiveness, and leading enterprises fully benefit from domestic substitution. Relying on full-scale production technology and the coordinated development of domestic and foreign markets, the market share of sawing business in 2021 has reached the first in China and the third in the world. At present, the company's product structure is excellent, mainly for high-speed steel bimetal band saw blade and cemented carbide band saw blade 2 categories, including 4 brands, 8 specifications, 11 series, 248 kinds of tooth profile, covering 13-80mm bandwidth of high-end, middle-end and economical products.

At the same time, the company insists on domestic and international coordinated development, and acquires Maitsen in the domestic market, giving full play to the synergy effect to accelerate the increase of the company's market share. The overseas market is due to the war between Russia and Ukraine, resulting in a shortage of production capacity in Europe. The company's exports are expected to maintain rapid growth. In order to take the lead in seizing the historical opportunity of domestic substitution, rapidly increase overseas market share and further consolidate the domestic leading position, the company plans to increase its sawing capacity, which will increase the annual production capacity of 10 million meters of high-speed steel bimetal band saw blades after reaching production. At the same time, it will have a production capacity of 1.6 million meters of cemented carbide band saw blades (32 new cemented carbide band saw blade production lines, there are 21, corresponding to 600000 meters).

New energy business: photovoltaic & energy storage industry is booming, the acquisition of Yada is expected to significantly boost the company's performance. Under the background of carbon peak, carbon neutralization, conflict between Russia and Ukraine and accelerated replacement of global clean energy, the prosperity of the photovoltaic industry is rising. according to the forecast of CPIA, the new installed capacity of global photovoltaic will reach 205-250GW in 2022, 85-100GW in China from 2022 to 2025, and the average annual installed capacity of photovoltaic will reach 232-286GW and 83-99GW in China. Due to the volatility, intermittence and instability of photovoltaic and wind power generation, the importance of energy storage has increased significantly. At present, the domestic photovoltaic + wind power stock is more than 800GW, and the energy storage matching rate is expected to be only 3%. It is expected that the photovoltaic, wind power stock and incremental energy storage matching rate will be greatly increased in the future. Under the background of the rapid development of photovoltaic and energy storage industry, photovoltaic inverter, photovoltaic optimizer and energy storage pcs as their key components are expected to usher in high-speed development in the future. Yada is a global power industry leader with 30 years of industry accumulation. It was once Emerson's main production base in China, with an average annual operating income of about 2.5 billion yuan from 2014 to 2021. The main products are chargers, custom power supplies, transformers, photovoltaic optimizers, photovoltaic inverters, energy storage converters, etc., and have established cooperative relations with many of the world's top 500 and top companies in the industry. Including Huawei, Apple Inc, Hewlett-Packard, American Advanced Energy and other head customers. After the merger of Yada, the company will raise an additional 242 million yuan in new energy projects to reach production, which will boost the company's performance and asset scale.

Improved profitability and excellent cost control. 2022Q1-Q3 gross profit margin is 41.01% (+ 0.98pct), net profit rate is 20.90% (+ 9.14pct); single Q3 gross profit margin is 46.12% (+ 3.63pct), net profit rate is 31.88% (+ 20.30pct). The increase in gross profit margin is mainly due to the increase in the proportion of overseas sawing business with better profits, and the significant increase in net profit is mainly due to the fact that the performance of platinum Thai electronics before the merger includes investment income, with an investment return of 6.67% (+ 6.65pct) in the first three quarters and 14.25% (+ 13.79pct) in Q3 alone. From the expense side, the company's 2022Q1-Q3 expense rate is 21.49% (- 2.24pct), of which the sales expense rate is 3.95% (- 0.96pct), the management expense rate is 12.64% (+ 1.20pct), the financial expense rate is 0.44% (- 1.04pct), and the R & D expense rate is 4.46% (- 1.44pct). During the single Q3 period, the expense rate was 22.36% (- 5.09pct), of which the sales expense rate was 3.62% (- 0.27pct), the management expense rate was 15.77% (+ 0.40pct), the financial expense rate was 0.37% (- 1.41pct), and the R & D expense rate was 2.60% (- 3.81pct).

Investment suggestion: we expect the company to achieve a net profit of 1.41,2.21 and 314 million yuan from 2022 to 2024, an increase of 101.5%, 57.4% and 41.7% over the same period last year, corresponding to PE of 33.6X, 21.4X and 15.1X.

The company is the leader of domestic sawing tools and is expected to fully benefit from the domestic substitution trend, and the overseas market is expected to maintain rapid growth under the background of the war between Russia and Ukraine; at the same time, the company's photovoltaic inverter + optimizer + energy storage pcs layout is smooth, the acquisition of Yada is expected to significantly boost the company's performance and maintain its "buy" rating.

Risk tips: sawing business downstream market demand is not as expected, foreign business development is not as expected, fund-raising project construction is not as expected.