According to the event company's quarterly report for 2023, 2023Q1-Q3 achieved an operating income of 885 million yuan, an increase of 26.14% over the same period last year, and a net profit of 63 million yuan, down 29.72% from the same period last year. Of this total, Q3 realized operating income of 283 million yuan, up 20.68% from the same period last year, down 13.13% from the previous month; and realized net profit of 13 million yuan from the same period last year, down 60.50% from the same period last year and 53.99% from the previous year.

The revenue end of the company maintains steady growth, while the profit end is under pressure. The company's profits have declined, the main reasons: 1) the implementation of large terminal strategy. The company's major customers are more concentrated in the photovoltaic industry, in order to quickly enter the market, product sales prices have been reduced, while affected by product upgrading, product gross profit margin has declined. 2) implement the overall solution strategy. The company increases its business and technical investment in traditional industry segmentation solutions, resulting in an increase in related personnel and sales costs. In order to enhance the overall solution capability of industrial automation and expand the product line of control, drive, transmission and sensor layer, the company has set up new guideway screw, industrial motor, photovoltaic micro-inverse, robot and other business departments to continue to increase investment in new product research and development, leading to an increase in R & D costs.

Q3 sales expense rate and R & D expense rate increased significantly. 1) 2023Q1-Q3 's gross profit margin was 29.85%, down 2.94 ppm from the same period last year; net profit margin was 7.25%, down 5.24pp from the same period last year. The gross profit margin of 2023Q3 was 30.04%, down 3.31pp from the same period last year and 0.36ppm from the previous year; the net profit margin was 4.69%, down 9.14pp from the same period last year and 4.35pp from the previous year. 2) during the period of 2023Q3, the expense rate increased by 27.19%, 6.94pp increased, 2.72pp increased, sales expense rate increased 2.33pp, month-on-month increase of 0.88ppp; management expense rate increased 0.22pp year-on-year, decreased by 0.60ppp; R & D expense rate increased 2.97pp over the same period last year, increased 2.33ppp month-on-month; financial expense rate increased 1.43pp and 0.12pp compared with the same period last year.

Profit forecast and investment advice. It is estimated that the return net profit of the company from 2023 to 2025 is 1.04,1.41 and 186 million yuan respectively, and the corresponding EPS is 0.69,0.93,1.23 yuan respectively. In the next three years, the return net profit will maintain a compound growth rate of 27% and maintain the "hold" rating.

Risk tips: the risk that downstream demand is lower than expected; the risk of intensified market competition; the risk of new product and technology development; the risk of raw material price fluctuation.