Industry boom continues, 23Q3 homing net profit + 59.89% compared with the same period last year

In the first three quarters of 2023, benefiting from the continued high prosperity in the lower reaches of oil and gas, marine engineering and LNG, the company achieved revenue of 4.24 billion yuan, an increase of 43.54% over the same period last year, and its net profit was 588 million yuan, an increase of 69.72% over the same period last year, exceeding market expectations. Looking at Q3 alone, the company achieved revenue of 1.817 billion yuan, an increase of 67.21% over the same period last year, and a net profit of 252 million yuan, an increase of 59.75% over the same period last year. In terms of profitability, 2023Q1-3 gross profit margin is 30.94%, year-on-year + 2.90pcts, net profit rate 14.02%, year-on-year + 2.09pcts. Q3 single-quarter gross profit margin of 32.59%, year-on-year + 4.33pcts, month-on-month + 2.02pcts, mainly due to product structure optimization and automation transformation to improve production efficiency; net profit rate of 13.94%, slightly lower 0.73pcts than the same period last year. We judge that it is mainly the impact of exchange gains and losses.

Orders on hand are full, high-end valves and overseas markets continue to make breakthroughs according to the company announcement, the company received 4.42 billion yuan in new orders from January to August 2023, an increase of 42% over the same period last year. The company has in-depth cooperation with SHEEL, TOTAL, Petrochina Company Limited, China Petroleum & Chemical Corp and other global energy giants, while consolidating its leading position in the traditional oil and gas field, LNG, marine engineering, hydrogen energy and other emerging fields continue to make breakthroughs, such as: FPSO ultra-high pressure automatic control valves have been supplied to the Brazilian project; liquid hydrogen valves have been used in many domestic liquid hydrogen projects, and the product performance has reached the world's leading level. In terms of market expansion, energy-related demand in Europe, Africa, the Middle East and other places is strong, the company's share at home and abroad continues to increase, and the growth space is further opened.

In September 2023, the company issued a restricted stock incentive plan to grant 16.6435 million restricted shares to management and core backbones, accounting for about 2.2% of the company's share capital, with a grant price of 7.33 yuan per share. The conditions of exercise granted for the first time are as follows: on the basis of 2022, the growth rate of net profit from 2023 to 2025 is not less than 44%, 58% and 74% respectively, corresponding to 670 million yuan, 740 million yuan and 810 million yuan from 2023 to 2025. This equity incentive demonstrates the company's confidence in future development, will fully mobilize the enthusiasm of the company's management and core personnel, and effectively combine the interests of shareholders, the company's interests and the personal interests of the core team, which is conducive to the long-term development of the company.

Investment suggestion

In 2023-25, the company is expected to achieve revenue of 5.542 billion yuan / 6.63 billion yuan / 7.612 billion yuan and net profit of 749 million yuan / 879 million yuan / 972 million yuan. The current stock price corresponds to a price-to-earnings ratio of 14X/12X/11X, maintaining a "buy" rating.

Risk hint

Rising raw material prices, lower-than-expected downstream demand, lower-than-expected new product development, risk of exchange rate fluctuations, and lower-than-expected customer expansion