Q3 revenue further accelerated compared with the previous month, and the performance continued to be high. 2023Q1-3 achieved a total operating income of 2.38 billion yuan, an increase of 135%, a net profit of 157 million yuan, an increase of 131%, and a 129% increase in non-profit, and continued a high increase in revenue. From a quarterly point of view, Q1/Q2/Q3 realized revenue of 5.8 million yuan, 7.7 billion yuan, 1.04 billion yuan, 125%, 128%, 145%, 0.3 billion yuan, 0.5 billion yuan, and 169%, 140%, 109%, 109%, respectively, respectively. The growth rate of Q3 performance slightly slowed down mainly because the gross profit margin of a single quarter fluctuated due to the impact of the project structure (the profit level of the project with high modularization ratio was better), and 8.5pct decreased year-on-year. The further increase in revenue compared with Q2 is mainly due to: 1) the signing of orders in 2022 is faster than that in 2021, and some of the projects affected by the epidemic are carried forward to this year, driving a high increase in revenue for the whole year; 2) the base figure is relatively low in the same period last year (22Q3 revenue / performance decreased by 27% and 4% respectively).

The gross profit margin fluctuated and the cost rate fell sharply. The gross profit margin of 2023Q1-3 is 15.36%, down 4.24pct from the same period last year (Q3 decreased by 8.5pct in a single quarter), mainly because the current settlement projects are mainly in the category of large-scale EPC, with a relatively low proportion of modularization. The expense rate during the period was 6.10%, a decrease of 4.8pct compared with the same period last year, in which the sales / management / R & D / financial expense rate changed year-on-year-0.5/-3.4/-0.6/-0.2pct (Q3 quarter-year-on-year change-0.6/-4/-0.8/-0.4pct), and the management expense rate decreased significantly, which is expected to be mainly due to: 1) the sharp increase in revenue led to the downward proportion of rigid costs. 2) the construction recovered steadily after the epidemic, and the cost of epidemic prevention and control was reduced. The impairment loss of assets (including credit) is 13.22 million yuan more than that in the same period. The income tax rate is 23.43%, year-on-year-2.6pct. 2023Q1-3 has a net operating cash flow inflow of 230 million, 90 million yuan less than the same period last year, and the overall cash flow performance is still excellent.

Abundant orders on hand, high downstream demand is expected to support the follow-up signing to maintain a high level. As of the end of 2023Q3, the company's contract debt balance is about 300 million yuan, and the company's current outstanding orders are estimated to be about 3 billion (1.7 times revenue in 2022) based on 10% advance payment, and existing orders are expected to be relatively abundant. Affected by Russia's "gas outage" in 2022, global chemical giants such as BASF and Invida gradually transferred their production bases to China in order to improve the stability of their supply chains. At present, the company's key customers have invested more than 150 billion yuan in China. Among them, the core customer BASF invested nearly 80 billion yuan in Guangdong Zhanjiang base (about 10 billion euros, put into production in 2030). Superimposed "Belt and Road Initiative" policy support, foreign business environment optimization, follow-up key customers' investment in China is expected to continue to increase, the company's newly signed order is expected to maintain a high level.

The layout of cross-field and cross-industrial chain is accelerated, and the medium-and long-term growth is excellent. In the medium and long term, the industrial modular construction is the application of "assembly" in the industrial field. With the upward labor cost and the promotion of intelligent construction in our country, the modular permeability is expected to continue to improve. In addition, in recent years, based on the modular advantages of fine chemical industry, the company has continued to expand into oil and gas energy, water treatment, mining and other fields (participating in FPSO, new optical materials and polymer modularization projects for the first time in 2022), while extending its downstream engineering maintenance and process package operation business (the scale of project maintenance and maintenance business has exceeded 100 million in 2022), and it is expected to gradually transform into local comprehensive modular engineering service leader with broad growth space.

Investment suggestion: we expect the company's homing net profit from 2023 to 2025 to be 2.90.37 billion yuan respectively, a year-on-year increase of 60%, 30%, 30%, 0.49, 0.63, 0.83, respectively, and the current share price is 2023 times higher than that of PE, maintaining a "buy" rating.

Risk hint: the progress of order execution is not as expected, the risk of contraction of overseas chemical leading investment in China, and the risk of gross profit margin fluctuation.