Event: the company released the three-quarter report of 2023. In the first three quarters of 2022, the company realized operating income of 2.411 billion yuan, YoY+33.65%; net profit of 271 million yuan, YoY+97.21%; deduction of 200 million yuan of non-return net profit, YoY+57.11%.

Excellent performance and continuous optimization of operation. The company's market competitiveness continues to enhance, business scale, operational efficiency and product gross profit continue to improve. In 2023, the company's performance improved quarter by quarter. Q3 achieved operating income of 1.066 billion yuan in a single quarter, + 23.89% year-on-year and + 14.23% month-on-month, and realized non-return net profit of 125 million yuan, + 52.21% year-on-year and + 86.54% compared with the same period last year. The company's gross profit margin and deducted non-net profit margin in the first three quarters were 28.32% and 8.29% respectively, up 0.7pct and 1.24pct respectively over the same period last year. In addition, the company's cash flow situation improved significantly, the net operating cash flow reached 281 million yuan in the first three quarters, from negative to positive compared with the same period last year. By the end of Q3, the company's contract debt was 2.188 billion yuan, an increase of 121% over the same period last year, and the sales collection was good.

The rapid growth of orders has laid a solid foundation for high performance growth. In the first three quarters of 2023, the company signed 5.079 billion yuan in new contracts, an increase of 78 percent over the same period last year, of which 51 percent came from the semiconductor industry and 36 percent from the photovoltaic industry. By the end of this report, contracts on hand totaled 6.053 billion yuan, an increase of 95 percent over the same period last year. The substantial increase in on-hand orders has laid the foundation for the rapid growth of the company's performance throughout the year and even in 2024.

OPEX business is growing rapidly, and gas projects are gradually releasing production capacity. The company continues to strengthen the expansion of OPEX business, including gas, wet chemicals, advanced materials, MRO and other businesses. In the first half of 2023, the company's gas business revenue increased by 42% compared with the same period last year, which was higher than the average growth rate of the market, and the gross profit margin continued to improve. The company's gas and material construction projects such as Hefei, Weifang, Lishui and Tongling will be gradually completed and put into production from the second half of 2023 to the end of 2024, so we expect the company's OPEX business to accelerate growth in 2023 and 2023.

The volume of GASBOX orders is large, and the domestic replacement market is broad. The GASBOX products of Hongyi Semiconductor, a subsidiary, have been supplied in bulk to domestic head semiconductor process equipment and photovoltaic chip process equipment manufacturers. Hongyi Semiconductor achieved a net profit of 47.92 million yuan in the first half of the year and 8.13 million yuan in 2022. The company's GASBOX business is on the right track. According to the investor relations activity record released by the company in September 2023, Hongyi Semiconductor's GasBox products have been fully and steadily produced this year, with a significant improvement in supply chain and capacity efficiency, and the growth rate of annual revenue and new contracts are expected to exceed the average growth rate of the company's performance.

Profit forecast: it is estimated that the net profit from 2023 to 2025 will be 3.9 billion yuan and 560 million yuan, maintaining the "buy" rating.

Risk tips: the risk of less than expected demand growth, the iterative risk of technology upgrading, the risk of raw material procurement, the risk of intensified competition in the industry.