Incidents: 23Q1-Q3 achieved operating income of 1.42 billion yuan, +21.09% year-on-year; net profit of 250 million yuan, +46.83% of the same period; net profit of net income after deduction of 240 million yuan, +48.24% year-on-year. 23Q3 The company achieved operating income of 51 million yuan, +3.83% year-on-year; net profit of 82.12 million yuan, +16.57% year-on-year; net profit after deduction of 80.57 million yuan, +17.10% year-on-year.

Comment:

Q3 Revenue growth is slowing, and new customers+new markets are expected to inject momentum. The company's 23Q3 revenue was +3.8% year-on-year, and the growth rate slowed month-on-month. It is mainly related to last year's high demand for heat pumps, which gradually led to rapid expansion of the household shielding pump business, so the base figure was low and then high. By business, the civilian pump market is relatively mature and is in a stage of steady growth. We expect the company's Q3 revenue to grow steadily; Leike Pump 23H1, a holding subsidiary in the commercial pump sector, will achieve revenue of 7.19 million yuan. With the continuous enrichment of product gradients, the improvement of business capacity, and the company's gradual establishment of comprehensive service capabilities for customers, Q3 commercial pump product volume is expected to accelerate; household shielding pumps are expected to increase in the penetration rate of energy-saving pumps. High power pump emissions, Q3 domestic and foreign sales are expected to increase well; industrial shielding pumps rely on supporting product types, 3 or continuous double digits Rapid growth.

Profitability continues to improve. The company's 23Q3 gross margin was +3.8pcts to 32.1% year on year, and profitability continues to recover. We expect to benefit mainly from: 1) Product structure upgrades. It is expected that the growth rate of the high-margin household shielding pump and industrial pump business in Q3 may continue to be superior to civilian pumps (2022 data, the gross margin of the company's chemical shielding pumps and hot water circulation shielding pumps is 30% +, higher than that of civilian pumps); 2) Production capacity construction in the two major factories in Wenling and Hefei is progressing, and the scale effect is gradually being unleashed. On the cost side, the company's 23Q3 sales/management/R&D/finance expense ratio was 4.4%/4.9%/4.3%/+0.1%, respectively, compared to -0.9/+0.2/+0.8/+1.9pct, respectively. There was a lot of exchange revenue affected by the devaluation of the RMB in the same period last year. The weakening of exchange dividends in the third quarter of this year led to a rise in the comprehensive cost rate. In the end, the 23Q3 company achieved a net profit margin of 16.0%, +1.7 pcts over the same period last year.

Investment suggestions: Dayuan Pump is the leading domestic shielded pump industry. Civilian pumps, household pumps, industrial pumps, and liquid-cooled pumps go hand in hand. The product matrix is complete, technological manufacturing is leading, and it has strong horizontal business expansion capabilities. The company's diversified business development logic is clear: the household shielding pump business has increased its contribution to the new market, structural optimization continues, industrial pumps have successfully expanded new customers+new scenarios, and commercial pumps have contributed marginal growth. Overall, the company's performance side is more flexible than the revenue side.

Net profit for 23-25 is estimated at 3.4/42/5.1 billion yuan (previous value is 3.6/43/5.3 billion yuan; revenue expectations for 23 years were slightly lowered due to the slowdown in Q3 revenue growth), corresponding to 11.4x/9.3x/7.7x, maintaining the “buy” rating.

Risk warning: increased market competition risk; risk of raw material price fluctuations; management risk caused by rapid expansion of scale.