The company released its three-quarter report for 2023, showing an increase of 1.75% in the first three quarters compared with the same period last year. The company's profitability repair in the third quarter is more obvious, deduction and return to the mother of the rapid growth of net profit, at the same time the company has now completed the acquisition of shares in Shengjiu forgings. Maintain the overweight rating.
Support the main points of rating
The results for the first three quarters of 2023 increased by 1.75% compared with the same period last year: the company released its quarterly report for 2023, with revenue of 2.092 billion yuan, an increase of 7.12% over the same period last year, and a net profit of 340 million yuan, an increase of 1.75% over the same period last year, deducting 241 million yuan from non-net profit, down 27.37% from the same period last year. 2023Q3 achieved a net profit of 239 million yuan, an increase of 161.75% over the same period last year and 323.69% month-on-month growth.
2023Q3's profitability repair is obvious: in the first three quarters of 2023, the company's comprehensive gross profit margin fell 2.45 percent year-on-year to 26.64 percent, and composite net profit margin fell 0.59 percent year-on-year to 16.97 percent. But in the third quarter of 2023, the company's gross profit margin reached 27.62 percent, an improvement of 2.59 percent year-on-year and 2.46 percent month-on-month improvement. We believe that the company's profitability is under pressure in the first half of the year, mainly due to the short-term impact of intensified competition and main bearing technology path switching, the company is currently actively promoting the research and development and production of self-aligning roller bearings, superimposed in the second half of the year began to improve the prosperity of the wind power industry, the company's profitability in the third quarter has reached an inflection point.
2023Q3 Company deducts the rapid growth of non-net profit, and the change of fair value thickens the company's performance: in the third quarter of 2023, the company achieved a net profit of 239 million yuan, an increase of 161.75% over the same period last year, and an increase of 323.69% over the same period last year. The deduction of non-net profit was 118 million yuan, an increase of 32.95% over the same period last year and 85.50% over the previous year. The relatively rapid growth of non-net profit reflects the development trend of the company's main business. At the same time, we observed that the amount of non-recurrent profit and loss of the company was relatively large in the third quarter. The change in fair value in a single quarter was as high as 142 million yuan, mainly due to the increase in the fair value of other non-current financial assets. To some extent, it thickens the performance of the company.
The acquisition of Shengjiu forgings has been completed, which is expected to help the company improve its profitability: on September 21, 2023, the company issued 13.38 million additional shares, raising a total of 350 million yuan to acquire 51.145% of the equity of Luoyang Shengjiu Forgings Co., Ltd. and replenish the working capital. 51.145% of the equity of Shengjiu Forgings was registered with the company on September 4, 2023, and Shengjiu Forgings became a wholly owned subsidiary of the company. It is expected to further enhance the company's overall profitability.
Valuation
Under the current equity, taking into account the pressure on the company's performance caused by the technology path switch of downstream customers, and combined with the company's three quarterly earnings reports, we adjust the company's forecast earnings per share for 2023-2025 to 1.23pm 1.45pm (the original forecast for 2023-2025 was 2.23pm 3.34pm-RMB), corresponding to a price-earnings ratio of 30.2x25.7x21.3 times earnings and maintaining an overweight rating.
Main risks faced by rating
The expansion of new customers is not as expected; the price increase of raw materials is higher than expected; the price competition is higher than expected; the large-scale reduction is not as expected; the development of new products is not as expected; the demand for wind power is not as expected.