Event: according to the company's quarterly report for 2023, the company achieved an operating income of 883 million yuan, an increase of 4.43% over the same period last year, a total profit of 47.2151 million yuan, an increase of 0.25% over the same period last year, and a net profit of 37.0738 million yuan, down 6.09% from the same period last year. In the third quarter, the company achieved operating income of 323 million yuan, an increase of 20.72% over the same period last year, a total profit of 19.1718 million yuan, an increase of 13.14%, and a net profit of 15.4334 million yuan, down 18.52% from the same period last year. The growth rate of total revenue and profit is better than we expected, and the growth rate of home net profit is lower than we expected.

The upward trend of the business continued, with a decline in gross profit margin and income tax rate dragging down homed net profit. (1) significant increase in revenue: the company's operating income in the third quarter increased by 20.72% compared with the same period last year, compared with-13.04% in the first quarter, and continued to accelerate from 3.86% in the second quarter, confirming that the company's large on-hand orders are gradually recognized as revenue. (2) the gross profit margin has declined: the gross profit margin of the company in the third quarter was 26.35%, down 3.30 percentage points from the same period last year, and 0.93 percentage points from the previous year. We judge that the decline in gross profit margin is due, on the one hand, to the great disturbance identified by some projects with low gross profit margin. On the other hand, it is due to the gradual embodiment of the inventory of high-priced raw materials last year. (3) the overall optimization of the expense rate during the period, but the accelerated layout of new areas led to an increase in management R & D expenses: the company's expense rate during the third quarter was 19.71%, down 3.02% from the same period last year. Among them, the rates of sales, management, R & D and financial expenses were 5.33%, 11.25%, 2.89% and 0.24% respectively, down 4.75% from the same period last year, up 0.98%, 0.26% and 0.49% respectively. In absolute terms, sales, management, research and development, and financial expenses in the third quarter fell by 9.78 million, increased by 8.86 million yuan, increased by 2.32 million yuan, and increased by 1.43 million yuan. We judge that the increase in administrative and R & D costs is mainly due to increased investment in new areas such as hydrogen production and data center cooling towers. (4) the increase in effective income tax rate constitutes a large drag: the effective corporate tax rate in the third quarter was 15.12%, while it was negative in the same period last year, an increase of 21.87 percentage points over the same period last year, which was a big drag on performance. (5) improvement of cash flow: the net cash flow generated by operating activities in the first three quarters was 142 million yuan, an increase of 195 million yuan over the same period last year, of which the net cash flow generated by operating activities in the third quarter alone was 70.6721 million yuan, an increase of 71.8914 million yuan over the same period last year. The cash-to-income ratio in the first three quarters was 112.27%, an increase of 16.70 percentage points over the same period last year.

The high increase in contract liabilities confirms that the on-hand orders still have a tendency to speed up. According to the semi-annual report, the company's mid-reporting end-on-hand orders totaled 3.593 billion yuan, an increase of 49 percent over the previous month (2.415 billion yuan in mid-22). Year-on-year growth rate of 17.49%), 42% (22 annual report of 2.531 billion yuan), the size of in-hand orders is about 2.7 times the company's annual income of 1.354 billion yuan in 2022. According to the company's three-quarter report, the final contract debt reached 1.223 billion yuan, a sharp increase of 74.51% over the same period last year, and continued to accelerate compared with the half-year year-on-year growth rate of 52.62%. It is confirmed that the high growth trend of on-hand orders is still continuing, considering that the company's order confirmation cycle is generally 1-2 years. Follow-up performance flexibility can be released.

Belt and Road Initiative, the runner of "New Industrial Revolution (AI) + New Energy Revolution", is the subject of new elasticity. We maintain the long-term judgment of the company, the driving force of the future development of the company is expected to bind the new industrial revolution and new energy revolution under the green electricity hydrogen production, AI, the potential space is expected. At the same time, the point of view different from the market is that we think that Belt and Road Initiative is not a thematic investment, and that grasping the correct way of opening is a new flexible track with strong ability to digest valuation. the company's overseas efforts to enjoy the "downstream multiplier effect + three tables to improve logic" is expected to become Belt and Road Initiative's elastic target.

Profit forecast and valuation: we judge that the inflection point of seagull performance growth has reached. We maintain the company's profit forecast of 101 million yuan, 145 million yuan and 213 million yuan in 2023-2025. The current stock price corresponds to 23 times, 16 times and 11 times of PE in 2023-2025, respectively, maintaining a "buy" rating.

Risk hints: the trend of carbon neutralization slows down, Belt and Road Initiative's promotion is blocked, and the release of AI calculus is lower than expected.