The net profit of 2023Q3 after deducting non-net profit was 589.262 million yuan, up 89.33% year on year. The company's 2023Q3 operating income was 654 million yuan, down 3.91% month on month, up 4.02% year on year; net profit was 60.1669 million yuan, up 26.93% month on month, up 122.92% year on year; net profit after deducting net profit was 589.262 million yuan, up 23.10% month on month, up 89.33% year on year. The company's operating income for the first three quarters was 1,854 billion yuan, up 9.28% year on year; net profit was 162 million yuan, up 90.79% year on year; net profit after deducting non-current revenue was 158 million yuan, up 82.62% year on year. The company's total profit and net profit increased during the reporting period compared to the previous year, mainly due to the increase in conveyor belt gross margin in the current period compared to the same period of the previous year and interest income earned on maturing time deposits. The company's 2023Q3 sales gross profit margin was 22.96%, up 3.67 pct month on month, up 7.89 pct year on year; net sales profit margin was 9.24%, up 2.27 pct month on month, up 4.99 pct year on year.

Projects under construction are progressing steadily. As the company's convertible bond project “15 million square meters of high-strength energy-saving and environmentally friendly conveyor belt project” was put into operation one after another, conveyor belt production capacity gradually increased to meet the demand for growing orders. At the same time, the company is steadily advancing the construction of Taisheng Technology's “60 million square meter intelligent conveyor belt project”, further expanding production capacity and increasing market share. According to the company's investor relations activity record table on September 22, 2023, the company currently has an overall production capacity of 90 million square meters, with a market share of around 14%. The company's conveyor belt production capacity will reach 150 million square meters after all of the Taisheng Company projects are put into operation by the end of 2025.

The future market space of the industry is broad. Compared with truck transportation, conveyor belt transportation of bulk materials has the advantages of being safer, more environmentally friendly, more energy-efficient and more efficient. Therefore, the company's downstream customers in the electricity, cement, iron and steel, port and other industries have gradually built long-distance conveyor belt projects in recent years to replace traditional road transportation. Demand for long-distance conveyors will increase steadily in the future. At the same time, with the continuous development and maturity of the industrial Internet, downstream industries such as mines, steel, ports, gravel and aggregates for industrial bulk material transportation are also facing the demand for intelligent upgrading and transformation, which also provides a broad market space for the conveyor belt industry.

Earnings forecasts and ratings. We estimate that the company's net profit for 2023-2025 will be 241 million yuan, 314 million yuan and 355 million yuan respectively, corresponding to EPS of 0.58, 0.76, and 0.86 yuan, respectively. Combined with comparable company valuations, we gave the company 20 times PE in 2023, with a corresponding target price of 11.60 yuan (target price of 11.60 yuan in the previous period, corresponding to 20 times PE in 2023, maintenance) to maintain the “superior to market” rating.

Risk warning: Project construction progress falls short of expectations, large fluctuations in raw material and product prices, safety and environmental risks, and macroeconomic downturn.