Event: Hanzhong Seiki released its Triple report 2023 on October 28. The company achieved revenue of 2.906 billion yuan in the first three quarters, an increase of 24.43% over the same period last year, a net profit of 680 million yuan, an increase of 43.46% over the same period last year, and a gross profit margin of 40.07%, an increase of 4.2pct over the same period last year. Of this total, Q3's revenue in the single quarter was 1.137 billion yuan, up 17.68 percent over the same period last year; the net profit returned to its mother was 314 million yuan, up 37.94 percent from the same period last year; and the gross profit margin was 42.73 percent, an increase of 4.52pct over the same period last year.

Q3 performance continues the trend of high growth, and profitability continues to enhance. The net profit of Q3 is 314 million yuan, an increase of 37.94% over the same period last year, and the gross profit margin is 42.73%. The improvement of 4.36pct compared with 23H1 is mainly due to: (1) the company's cost management and control ability has been enhanced, and the total rate of 23Q3 single-quarter sales, management and R & D expenses is 12.34%, which is lower than 23H1 by 1.89pct. (2) the product structure of the company is optimized, the income growth rate of vacuum products with higher gross profit margin increases rapidly, and the proportion of revenue further increases; (3) due to the influence of the appreciation of US dollar and euro, overseas exchange earnings increase, and the financial rate decreases from 0.58% of 23H1 to-3.03% of 23Q3.

With the optimization of product structure, vacuum pump has become an important driving force for the company's performance. In recent years, the proportion of the company's vacuum pump sales has been increasing, and the proportion of 23H1's vacuum pump sales has risen to 42.19%, and it is expected to continue to rise in the second half of the year. Compared with the company's other major products, compressors (groups), the gross profit margin of 2023H1 vacuum products is about 10 pct higher, and the increase in the proportion of vacuum products will help the company to improve its profitability. Vacuum pump is mainly for photovoltaic, semiconductor and other emerging hot industries, broad space for development, we believe that vacuum pump will be the main source of company performance growth in the future.

Photovoltaic-semiconductor two-wheel drive, vacuum pump market space is expected to be further developed. The company's vacuum pump is mainly used in photovoltaic crystal and battery process in the photovoltaic field. The company has long-term and in-depth cooperation with major domestic photovoltaic manufacturers and important Taiwan businessmen, such as Jingsheng Mechatronics, Longji Green Energy, North Huachuang, etc., with the development of photovoltaic cell technology, photovoltaic vacuum pumps are expected to grow further. As the leader of screw vacuum pump, the company currently has three series of products: PMF, iPM and iPH, which can meet the full range of vacuum dry vacuum pump products with the most advanced technology in semiconductor production. As the domestic semiconductor equipment factory pays more and more attention to the security of the supply chain, the domestic substitution of parts and components is expected to achieve further growth in the process of acceleration. Photovoltaic-semiconductor two-wheel drive, the company's vacuum pump business still has a lot of room for growth.

Profit forecast, valuation and rating: considering the acceleration of domestic replacement of domestic equipment parts and the technological progress of photovoltaic cells, we are optimistic about the rapid development of the company's photovoltaic and semiconductor vacuum pump business, which will continue to improve the company's profitability. We raised the homing net profit forecast for 2023 and 2024 to 7.60 / 922 million yuan respectively (compared with the last forecast + 13.1% impulse 12.9% respectively), and increased the 2025 homing net profit forecast to 1.051 billion yuan, corresponding to EPS 1.72 shock 1.97 yuan, respectively, corresponding to PE is 16-14-12 times, maintaining the "buy" rating.

Risk tips: rising prices of raw materials, downstream photovoltaic expansion is not as expected, and the progress of localization of semiconductor equipment parts is not as expected.