What happened: the company released its third-quarter report in 2023. 23Q1-3, the company achieved revenue of 2.382 billion yuan, yoy+134.6%, to achieve return net profit / deduction of non-return net profit of 155 million yuan, yoy+130.5%/129.1%. 23Q3 realized revenue of 1.036 billion yuan in a single quarter, and yoy+145.3%, realized net profit of return to home / deduction of net profit of non-return to mother of 0.69 billion yuan. Yoy+109.4%/90.6%, 's performance exceeded expectations.

23Q3's revenue and performance continued to increase, or it was carried forward by major projects.

The company 23Q1-3 realized revenue of 2.382 billion yuan, yoy+134.6%, realized net profit of 157 million yuan, yoy+130.5%, deducted non-return net profit of 151 million yuan, yoy+129.1%. From a quarterly point of view, the revenue of 23Q1/Q2/Q3 is RMB 1.036 billion and yoy+125.1%/128.4%/145.3% respectively. 23Q1/Q2/Q3 realized a net profit of 0.34 prime 0.53 / 69 million yuan, yoy+168.8%/140.1%/109.4%. We analyze the reasons for the high revenue and performance of 23Q3: 1) 22Q3, the company's parent net profit is 33 million yuan,-3.9% compared with the same period last year, with a low base; 2) major projects are carried forward to promote revenue and performance growth.

23Q3 gross profit margin has declined, and cost control has achieved remarkable results during the period.

In terms of gross margin: 23Q1-3 comprehensive gross profit margin 15.36% fuyoymure 4.24pct, of which 23Q3 comprehensive gross profit margin 15.15% fuyoymure 8.48pct. We speculate that the gross profit margin decreases or because major projects enter a centralized carry-over period, the proportion of revenue from construction and EPC business increases, while its gross profit margin is lower than that of module manufacturing business, thus dragging down the overall gross margin level.

In terms of expenses: during 23Q1-3, the expense rate (excluding R & D expenses) is 4.98% (excluding R & D expenses); the sales / management / finance / R & D expense rates are 0.63%, 4.58%, 0.23%, 1.12%, respectively, and the sales / management / finance / R & D expense rates are yoy-0.54/-3.37 /-0.24/-0.60pct. During the period of our analysis, the expense rate decreased or due to a sharp increase in revenue.

Cash flow: 23Q1-3 operating cash flow net inflow of 230 million yuan, year-on-year inflow of 94 million yuan. 23Q3 single-quarter operating cash flow net inflow of 25 million yuan, less inflow of 163 million yuan compared with the same period last year.

"Fast saving and good" promotes the application of industrial modules, and industrial migration can see the needs of new construction.

Modular construction has significant advantages, which is expected to become a major trend for the construction of industrial facilities in the future. The modular construction of the factory is similar to the prefabricated housing construction, which has the advantages of short construction period and saving resources: 1) the construction period is short: take the second phase of the Shanghai Caojing antioxidant plant project cooperated by the company and BASF in 2018 as an example, the project takes 10 months to complete, saving 50% of the construction period compared with the traditional construction method. 2) Provincial resources: according to the company's prospectus, taking the construction of eight 150000-ton ethylene cracking furnaces as an example, the human resources used in modular construction are reduced by 74%, scaffolding poles by 93%, and crane resources by 87%. Modular construction is expected to become the mainstream way of industrial construction in the future.

With the help of the industrial relocation of European chemical giants, there is a broad space for the company's performance growth in the long run. 23M9, the price of natural gas in Europe reached US $11.55 per million British thermal units, and the average price of electricity reached 91 euros / MWh, which remained high. In order to reduce operational risks and maintain the stability of energy and raw material supply, European chemical giants are expected to accelerate industrial transfer, and companies are expected to benefit from the construction of overseas plants by European chemical giants.

Close cooperation among quality customers, steady progress on major projects, and employee stock ownership plan demonstrate confidence in development.

Big customers are sticky and cooperate closely. At present, the company has signed three contracts around the BASF Zhanjiang integration base project, with a total amount of about 21-2.7 billion yuan. The BASF Zhanjiang base is expected to be completed in 2030 with a total investment of 10 billion euros. The company cooperates closely with BASF and actively participates in the construction of the project, which is expected to continue to benefit.

Major projects have achieved phased results. On May 8, 2023, the first batch of modules of Invida Polymer Phase III project were successfully hoisted, which was highly appraised by customers. The contract value of the project amounts to 1.279 billion yuan, and the implementation period is from January 28, 2022 to December 13, 2023.

The buyback shares are used in the employee stock ownership plan to demonstrate confidence in development. The company launched a share repurchase program of no more than 5 million shares in 22M10. By the end of 23M9, the company had completed the repurchase, and actually repurchased 3.58 million shares of the company, accounting for 0.80% of the company's total share capital. The repurchased shares will be used in the first phase of the employee stock ownership plan.

Profit forecast and investment suggestions: from 2023 to 2025, the company is expected to achieve operating income of 26.15,35.23,4.598 billion yuan, yoy+51.9%, 34.7%, 30.5%; net profit of 1.85,2.52,337 million yuan, yoy+34.6%, 36.5%, 33.8% The corresponding EPS is 0.41,0.56,0.75 yuan respectively, and the current price corresponding to PE is 21.7,15.9,11.9 times, maintaining the "buy" rating.

Risk reminder event: the penetration speed of industrial module is not as fast as expected, and the acquisition of general contract orders for future projects is not as expected.