Event: according to the company's quarterly report for 2023, Q3 achieved an operating income of 513 million yuan, an increase of 3.83% over the same period last year, and a net profit of 82 million yuan, an increase of 16.57% over the same period last year. In the first three quarters, the company achieved an operating income of 1.417 billion yuan, an increase of 21.09% over the same period last year, and a net profit of 249 million yuan, an increase of 46.83% over the same period last year.

Q3 income growth slowed down, energy-saving pump export pressure for a short time. Q3 income growth has slowed down, we believe that it is mainly affected by the decline in the export boom of household energy-saving shielded pumps, referring to the decline in China's heat pump exports to Europe for three consecutive quarters compared with the same period last year. Based on the market size of Europe and the United States, the market share of the company's energy-saving pump products is still at a low level. With the continuous digestion of overseas inventory and the continuous accumulation of the company's brand reputation, we believe that the company's energy-saving pump export is expected to return to steady growth. In addition, the industrial shielding pump plate, we believe that with the company's technical and technological standardization, matching development continues to advance, as well as the transformation of the new production line, is expected to maintain a high growth rate. We expect to maintain steady growth in civil pump and liquid-cooled pump business.

The gross profit margin continued to rise and the exchange earnings decreased. In 2023, Q1-3 company's gross profit margin is 32.77%, year-on-year + 4.94pct, net profit rate is 17.42%, year-on-year + 2.92pct. Q3 single-quarter gross profit margin is 32.13%, year-on-year + 3.78pct, net profit rate is 15.92%, year-on-year + 1.66pct. The company's gross profit margin continues to rise, mainly due to the improvement of product structure and the increase in the proportion of household and industrial shielding pump business. In addition, the overall decline in raw material prices releases some profit space.

In terms of expense rates, the rates of single Q3 sales, management, R & D and financial expenses are 4.40%, 4.89%, 4.34% and 0.08%, respectively, which are-0.88,0.23,0.76 and + 1.93pct respectively compared with the same period last year.

The increase in the rate of financial expenses is mainly due to a significant reduction in Q3 exchange gains. In the first three quarters of 23, the company's sales, management and R & D expenditure rates were 4.40%, 5.21%, 4.37% and-1.07%, respectively, compared with the same period last year. + 0.32,-0.06, + 0.73, + 0.79pct, respectively.

The operation is sound and the monetary funds are sufficient. 1) as of 23 years, the cash and other current assets of Q3 company totaled 1.045 billion yuan, + 96.43% compared with the same period last year; notes and accounts receivable totaled 358 million yuan, + 15.11% year-on-year; the company's inventory was 353 million yuan, + 4.75% year-on-year; notes and accounts payable totaled 347 million yuan, + 11.22% year-on-year. 2) the net operating cash flow of Q1-3 company in 23 years was 305 million yuan, which was + 23.48% compared with the same period last year. The net operating cash flow of Q3 in 23 years was 175 million yuan, which was-4.37% compared with the same period last year.

Profit forecast and investment rating: we expect the company's operating income for 23-25 years to be RMB 2.314 billion, respectively, which is + 14.1%, 21.2%, 18.4%, respectively, and the net profit of the home company is RMB 3.25, 408, and 507 million, respectively, and the corresponding PE is 12.44, 9.89 and 7.96 times, respectively, compared with the same period last year. Maintain a "buy" rating.

Risk factors: raw material price fluctuation, product promotion is not as expected, market demand is not as expected, industry competition is intensified, and so on.