Events:

Tongfei shares released its third quarterly report for 2023 on October 24: from January to September 2023, the company achieved revenue of 1.327 billion yuan, year-on-year + 98.02%; net profit of 141 million yuan, + 64.05%; deduction of non-parent net profit of 129 million yuan, + 88.28%; gross profit margin of 27.39%, year-on-year + 0.42 pct; net profit rate of 10.62%, year-on-year-2.20pct.

Among them, 2023Q3 achieved revenue of 621 million yuan, year-on-year + 131.49%, month-on-month + 43.75%; return to the mother net profit of 38 million yuan, year-on-year + 96.41%, month-on-month + 90.92%; gross profit 28.41%, year-on-year-1.27pct, month-on-month + 2.96pct; net profit 11.88%, year-on-year-2.12pct, month-on-month + 2.94pct.

Main points of investment:

Businesses such as energy storage help improve performance, and economies of scale drive profitability to pick up. The company achieved rapid revenue growth in the first three quarters of 2023, which we speculate is mainly due to the continued high growth of the company's energy storage business and significant growth in high-end businesses such as semiconductor equipment business. 2023Q3, the gross profit margin and net profit margin of the company have rebounded compared with Q2, compared with + 2.96pct and + 2.94pct, respectively. We speculate that the scale effect of energy storage business is gradually emerging, and the business structure of CNC machine tools is constantly optimized.

We will speed up the development of overseas markets and expand the capacity of equity incentives to demonstrate confidence in development. The company actively participates in overseas energy storage, machine tools and other exhibitions to speed up the development of energy storage temperature control and other overseas markets. The company has implemented stock incentives twice in less than three months and the scope of incentives has been expanded, reflecting that the company is in a period of rapid business development and confidence in development. Among them, after the adjustment of the first phase of the restricted stock incentive plan, the number of restricted shares granted for the first time is adjusted from 716000 shares to 1.2888 million shares, and the number of reserved restricted shares is adjusted from 186000 shares to 3348,000. the second phase of the restricted stock incentive plan awarded 2.665 million restricted shares to the 144eligible subjects at a price of 25.60 yuan per share.

Profit forecast and investment rating: based on the semiconductor, energy storage and other downstream demand to maintain a high economy, while the energy storage temperature control industry competition trend, we adjust the company's profit forecast, the company is expected to achieve revenue of 1.97 billion yuan, 2.61 billion yuan and 3.36 billion yuan, return to the mother net profit of 220 million yuan, 310 million yuan and 430 million yuan, the current stock price corresponds to PE 34X, 25X and 18X. Based on the high downstream demand, maintain the "overweight" rating.

Risk hints: macroeconomic downside risk, market competition aggravating risk, raw material price fluctuation risk, technology less than expected risk, product substitution risk