3Q23 performance is in line with our expectations
The company announced 1-3Q23 results: operating income 44.766 billion yuan, year-on-year + 10.41%; return net profit 2.912 billion yuan, year-on-year + 16.47%; of which, 3Q23 income 14.851 billion yuan, year-on-year + 17.51%; return mother net profit 910 million yuan, year-on-year + 25.32%; deducting non-home net profit 870 million yuan, year-on-year + 24.86%. The performance is in line with our expectations.
Orders for thermal power remained high in the first three quarters, while the growth rate of wind power orders slowed down. Company 1-3Q added effective orders of 64.224 billion yuan, + 19.3% compared with the same period last year. Among them, the growth rate of clean energy efficient equipment driven by thermal power business is obvious, from + 49.7% to 26.152 billion yuan compared with the same period last year; the order growth rate of engineering and trade / modern manufacturing services / emerging growth industries is steady, which is 12.0% to 76.49% and 74.11 billion yuan, respectively, compared with the same period last year. Affected by the slowdown in the overall growth rate of the wind power industry and the intensification of competition in the industry, the company's renewable energy equipment industry orders grew by-1.3% to 14.694 billion yuan compared with the same period last year.
Profitability has further improved. The company's 1-3Q23 gross profit margin is 17.4%, year-on-year + 1.16ppt, of which 3Q23 gross profit margin is 18.9%, month-on-month + 0.3ppt. We believe that as revenue is gradually recognized in high-margin thermal power orders that came into effect last year, the company's profitability is expected to continue to improve; 1-3Q23 sales / management / R & D expense rates are respectively-0.02/+0.03/+0.20ppt to 2.4%, 4.8%, 3.8%. The return to the mother net interest rate is 6.5%, + 0.3 ppt compared with the same period last year; after the operating cash flow restores the influence of the financial company, it increases by 563 million yuan compared with the same period last year.
Trend of development
Six Power Co., Ltd. has made concerted efforts to promote the steady growth of the company. 1) traditional energy: the company recently won the bid for generators and steam turbines of Anhui Huainan Pingwei Power Plant and Zhejiang Nengtai No.2 Coal-fired Project. With the acceleration of approved construction of thermal power plus nuclear power, we believe that the company's revenue in the traditional energy industry is expected to accelerate. 2) Renewable energy: the company launched 18MW direct-drive / semi-direct-drive offshore wind turbines, 10MW + onshore wind turbines and other new products. Since 2021, the approval of pumped storage power station has exceeded 100GW, and the company has sufficient hand-held pumping orders as a major equipment supplier. 3) emerging business: the company's layout of photothermal power generation, compressed air energy storage, flywheel energy storage and other multiple energy storage technology routes, while in the field of hydrogen energy release of the first domestic MW PEM hydrolytic hydrogen cell products, we think it is expected to promote the growth of the company.
Profit forecast and valuation
Taking into account the increase in expenses in the fourth quarter, we reduced our 2023 net profit by 5.3% to 3.53 billion yuan, leaving the 2024 profit forecast unchanged. The current A-share price corresponds to a price-to-earnings ratio of 13.3 / 10.4 times 2024. The current H-share price corresponds to a price-to-earnings ratio of 4.5 times 2023 pound 6.0 in 2024. Maintain the outperform industry rating, but due to the downside of the valuation center of the sector as a whole, we downgrade the target price of Ahammer H shares by 20.5% less than 41.9% to 19 yuan / HK $9, corresponding to 2023, 16.8 and 5.4 times earnings in 2024, respectively, with 25.7% and 18.7% upside space compared with the current share price.
Risk
The growth rate of power investment is lower than expected, and the cost of raw materials is higher than expected.