Event: the company released its quarterly report of 2022 on October 27, with revenue of 520 million yuan and YoY+ of 72.8% in the first three quarters; net profit of 320 million yuan and 120.8% of YoY+; deducting 300 million yuan of non-net profit, YoY+118.5%. Performance is in line with market expectations. The company revolves around the two major tasks of production guarantee and the construction of the third phase of the project, the rapid growth of core business, while promoting salary reform and equity incentives, the core backbone team is more stable.

The performance of 3Q22 increased by 165%; the net interest rate increased significantly. 1) in a single quarter, the company's 3Q22 achieved revenue of 200 million yuan, YoY + 105.5%; net profit of 140 million yuan, YoY + 165.1%; deduction of non-net profit of 120 million yuan, YoY + 149.0%. The company's revenue and net profit reached record highs in a single quarter. 2) profitability: 3Q22 gross profit margin fell 0.3ppt to 78.0% year-on-year; net profit margin increased 14.9ppt to 66.4% year-on-year. 1~3Q22 gross profit margin fell 4.4ppt to 74.3% year-on-year; net profit margin rose 13.4ppt to 61.7% year-on-year. The company's management expense rate decreased 14.0ppt compared with the same period last year, which is the main reason for the significant increase in net interest rate.

During the period, the expense rate decreased by 19.7 ppt compared with the same period last year; receivables reflect the downstream boom. During the 1~3Q22 period, the expense rate decreased from 19.7ppt to 7.6% compared with the same period last year. Specifically: 1) sales expense rate 0.8%, year-on-year reduction of 0.01 pptpolitics 2) Management expense rate 3.8%, year-on-year reduction of 14.0ppt, mainly due to the corresponding depreciation expense transferred out of management expenses after the kiloton line was put into production; 3) the R & D expense rate of 4.8%, a year-on-year reduction of 4.1ppt 4) the rate of financial expenses is-1.8%, compared with-0.3% in the same period last year. By the end of 3Q22, the company: 1) accounts receivable and bills 720 million yuan, an increase of 124.1% over the beginning of the year; 2) prepayments of 4 million yuan, a decrease of 15.5% from the beginning of the year; 3) inventory of 30 million yuan, an increase of 23.0% over the beginning of the year; 4) contract liabilities of 10 million yuan, basically the same as at the beginning of the year. The net cash flow of 1~3Q22 's operating activities was 2 million yuan, down 62.6% from the same period last year, mainly due to the decrease in cash collection and the increase in the payment of materials, labor and other expenses.

We will promote equity incentives and make the core backbone team more stable. On October 13, the company issued a draft of equity incentive for 2022, which intends to grant 1.0918 million shares (0.25% of the total share capital) of the second category of restricted shares at a price of 23.36 yuan per share, of which 873400 shares are granted to 13 targets for the first time. The unlocking condition is based on 2021, 1) revenue growth in 2022 is not less than 65% and net profit growth is not less than 105%. 2) revenue growth in 2023 is not less than 240% and net profit growth is not less than 235%. 3) revenue growth in 2024 is not less than 290% and net profit growth is not less than 330%. 4) revenue growth in 2025 is not less than 350% and net profit growth is not less than 440%. Suppose it is granted for the first time in November 2022, the corresponding amortization expense of 18.96 million yuan will be awarded for the first time, and 750000, 4.54 million, 4.67 million, 4.85 million and 4.14 million yuan will be amortized in 2022-2026.

Investment suggestion: the company is a small giant of high-end carbon fiber in China, taking the lead in realizing the batch application of ZT7 series carbon fiber in aerospace, with strong customer stickiness and demand certainty. Equity incentive is conducive to improve the governance structure, fully mobilize the enthusiasm of employees, the vitality of the enterprise will be accelerated release. We take into account the downstream demand rhythm adjusted profit forecast, the company is expected to return to the net profit of 470 million yuan, 720 million yuan and 860 million yuan in 2022-2024, respectively, and the current stock price corresponds to the 51x/33x/28x of PE in 2022-2024. We maintain the "recommended" rating, taking into account the space brought by capacity release and the promotion of equity incentives.

Risk tips: downstream demand is lower than expected, capacity release is not as expected, and so on.