Event: the company issued the third quarter of 2023 results announcement, 23Q1-Q3 achieved operating income of 505 million yuan, an increase of 14.05% over the same period last year. The net profit of returning to the mother was 18 million yuan, down 29.64% from the same period last year, and the net profit after deducting non-return was 9 million yuan, an increase of 196.76% over the same period last year. In the third quarter alone, the income was 195 million yuan, up 12.3% from the same period last year, the net profit was 7 million yuan, down 62.88% from the same period last year, and 5 million yuan was deducted from the same period last year, an increase of 5.34% over the same period last year.

Actively expand the application field of leak detection instruments, the company's traditional advantages are expected to continue. The company has been working in the field of leak detection instruments for many years, and has three types of leak detection products: helium mass spectrum leak detector, vacuum box leak detection and recovery system, and air tightness leak detector. In the first half of 2023, the company's new energy lithium battery sealing intelligent testing equipment was identified as the first set of major technical equipment in Anhui Province. In addition, the company is actively expanding the application and promotion of leak detection instruments in new energy vehicles, energy storage, hydrogen energy batteries and other fields, and actively carry out the research, demonstration and pre-research of hydrogen energy battery-related testing business and instruments. The expansion of new areas is expected to promote the continuous growth of the company's leak detection instrument business.

Carbon verification in the national non-electric power industry has been launched, the carbon market is expected to expand, and environmental monitoring instruments may usher in new machines. In October 2023, the Ministry of Ecology and Environment successively issued the notice on doing a good job in reporting and verifying greenhouse gas emissions by enterprises in some key industries in 2023 (hereinafter referred to as "the notice") and the "measures for the Administration of Voluntary greenhouse Gas reduction Trading (trial implementation)" (hereinafter referred to as the "Management measures"). Among them, the "notice" indicates that the verification of carbon emission reports of cement, electrolytic aluminum and iron and steel enterprises is completed ahead of other industries, and the carbon market may be expanded.

The release of the "Administrative measures" means that CCER is officially restarted. The company's environmental monitoring products cover areas such as air pollutants and water quality monitoring, and the CEMS series of products can meet the ultra-low emission needs of special industries. We believe that with the increase in the number of industries included in the carbon market and the increased demand for carbon monitoring, environmental monitoring instruments are expected to usher in new opportunities.

The R & D investment will remain high, and the sales system will be optimized to reduce costs and increase efficiency. 23Q1-Q3, company sales expenses 119 million yuan, yoy-4.95%, company since 2023 actively build LTC (Lead to Cash) sales system, in order to achieve the sales system to reduce costs and improve efficiency. In terms of R & D expenses, the company's R & D expenditure rate has been at a high level in the industry for many years. In the first three quarters of 2023, the company's R & D expenditure was 118 million yuan, and the yoy+14.9%, R & D expense rate was 23.35%. Years of high R & D investment helped the company to achieve new product research and development and product expansion. In 2023, the company successively launched the sixth generation ion chromatograph IC6300 series intelligent ion chromatograph and the fifth generation atomic absorption spectrometer AA2300 series products to further expand the product line of laboratory instruments.

Investment advice and valuation: we expect the company's sales revenue from 2023 to 2025 to be 9271,351 million yuan, an increase of 37.3%, 45.7% and 47.9% respectively over the same period last year. The net profit of returning to the mother was 1.54 billion yuan, up 115.7%, 49% and 46.4% over the same period last year. The corresponding PE is 23x, 15.4X and 10.5X, respectively. Maintain the investment rating of increasing holdings.

Risk hint: industry periodic fluctuation risk, downstream market demand instability risk, market competition risk, project construction lower than expected risk.