Performance summary: in the first three quarters of 2023, the company achieved operating income of 290 million yuan, an increase of 9.9% over the same period last year; net profit of 40 million yuan, an increase of 5.9% over the same period last year; and non-return net profit of 40 million yuan, an increase of 36.6% over the same period last year. In the third quarter of 2023, the company achieved revenue of 90 million yuan, an increase of 15.4% over the same period last year, a net profit of 10 million yuan, a decrease of 15.7%, and a net profit of 9.49 million yuan, an increase of 96% over the same period last year.

The gross profit margin rose in the first three quarters compared with the same period last year, and the net profit margin was under short-term pressure from expenses. In the first three quarters of 2023, the company's sales gross margin / net profit margin was 32.4% / 15.3%, respectively, compared with the same period last year + 3.2/-0.6pp. The single Q3 gross profit rate / net profit rate was 31.8% / 11.8% respectively, and decreased 3.6/4.7pp respectively compared with the previous month. The main reason for the larger decline in net interest rate was that the company implemented equity incentives to increase fees by about 3.35 million during the reporting period, while the company received 5 million of Shenzhen enterprise subsidies in the third quarter of 2022, resulting in a higher 2022Q3 base. Expense side: the sales / management (including R & D) / financial expense rates of the company in the first three quarters were 6.8%, 11.9% and 0.8%, respectively, compared with the same period last year-0.4pp/+0.11pp/+0.7pp.

The further increase in R & D expenditure rate is at an all-time high, broadening the "moat" of product competition. In the first three quarters of 2023, the company's R & D spending rate was 7.9%, an increase in 0.8pp compared with the same period last year. According to the company's semi-annual report in 2023, the research project is disclosed: the progress of ① integrated layout industrial control industry chain is accelerated, various types of servo drives and motion controllers are expanded, and servo Renesas chip replacement project is developed, which is expected to reduce costs and improve the synchronous real-time performance of EtherCAT machines. The conclusion of ② TE series of energy storage converters and the completion of the development of core technical modules such as PCS/BMS are expected to benefit from the high installed growth of the energy storage industry and bring new growth points.

The recovery trend of industrial control downstream traditional industries is gradually showing, the frequency converter competition pattern is good, the export pace is relatively fast, the company is expected to meet the high elastic growth. At the macro level, the global manufacturing PMI in September 2023 was 48.7%, an increase of 0.4pp for the third month in a row, and a month-on-month increase of 0.5pp of 50.2% in China, returning to the expansion range.

At the meso level, according to the monthly order data statistics of the industry, the demand of domestic traditional industries has been steadily upward since May. The frequency converter has passed the stage of clearing the tail of the domestic industry, the pace of export is fast, and product prices and profitability are expected to be stable. At the micro level, the company has been ploughing the frequency converter for many years and has rich technical experience. According to the company's investor exchange announcement, the company is gradually improving the establishment of dealer channel network in overseas markets, and will focus on investing resources in Southeast Asia, the Middle East, Africa, CIS, Latin America and other markets in the next 1-2 years. and simultaneously carry out research activities in developed market areas to steadily promote overseas sales business.

Profit forecast and investment advice. The company's revenue from 2023 to 2025 is expected to be 440 million yuan, 590 million yuan and 810 million yuan respectively, and the year-on-year growth rate of net profit for the next three years is 54.3% 39.3% and 45.1% respectively. The company's product structure is perfect, integrated solutions enhance customer stickiness, "overseas + multi-fields" go hand in hand, promote the company's performance to improve, and maintain the "buy" rating.

Risk hints: the risk of falling product prices due to increased competition; the relatively low risk of high-performance products; the risk of rising raw material prices; and the risk of exchange rate fluctuations affecting overseas business revenue.