Event: 23Q3 achieved operating income of 1.428 billion yuan, year-on-year + 49%, net profit of 77.241 million yuan, + 111.38%, deduction of non-return net profit of 64.2837 million yuan, + 171.54%.

Retail and engineering recovery, Q3 revenue growth accelerated. The revenue growth rate of Q3 is much higher than that of Q2 (+ 8.59%). We believe that the main reason for Q3's outstanding revenue performance is the recovery of the company's retail business and engineering end business. In 2022, the company won the bid for clean energy central heating projects in 15 high-altitude townships in the south of Xizang. We expect these successful central heating projects to contribute to the company's revenue and profit growth this year.

The sales expenses are properly controlled and the profitability of Q3 is greatly improved. Q3 achieved a gross profit margin of 25.55%, year-on-year-4.06pct. From the cost point of view, Q3 company sales, management, R & D, financial expense rate respectively compared with the same period last year-4.62/-1.16/-0.77/+0.72pct, the company sales expense rate significantly reduced. Despite a slight decline in gross profit margin, Q3's net profit margin is 7.80 per cent, year-on-year + 3.99pct, when fees are properly controlled.

The net operating cash flow has increased significantly and the turnover efficiency has improved.

1) the total contract liability of the company at the end of Q3 is 556 million yuan, which is 19.94% higher than that at the end of the same period last year, which to a certain extent reflects the increase in the company's existing orders, which is conducive to supporting future revenue growth.

2) the net cash flow generated by the operating activities of Q3 company was 143 million yuan, which was + 128.38% compared with the same period last year, mainly due to the increase in cash inflow from operating activities caused by the increase in sales revenue.

3) the turnover days of inventory, accounts receivable and accounts payable at the end of Q3 are higher than those at the end of 23H1, respectively, and the overall turnover efficiency is improved.

Profit forecast: we are optimistic about the development trend of the global heat pump industry. As an important enterprise of domestic heat pump export, the company is expected to benefit from the high demand for overseas heat pumps, and the company's domestic large-scale heating business is also expected to become a new business increment of the company. We estimate that in 2023-2025, the company will achieve an operating income of 46.26 million yuan, 56.38 billion yuan, a year-on-year increase of 18.7%, 21.9%, 17.2%, and a net profit of 3.94 million, 4.83 million, and 18.4 percent, corresponding to PE11.85/9.67/8.17x.

Risk factors: heat pump exports are lower than expected, raw material costs rise, real estate affects the demand for water heaters, water purifiers and other products.