Event: The company released its three-quarter report for 2023. In Q3 of 2023, the company achieved operating income of 79 million yuan, +94.73%; net profit of the mother - 19 million yuan, +67.58%; net profit after deduction of the mother - 0.2 million yuan, +62.08% year-on-year. In 2023, Q1-3 achieved a total operating income of 305 million yuan, +32.57% year-on-year; net profit of 0.6 billion yuan, +112.39% year-on-year; net profit after deducting non-return net profit of -03 billion yuan, +95.21% year-on-year.
Key points of investment:
Revenue increased in 23Q3, and is expected to continue to increase volume in the fourth quarter. 23Q3's revenue is +94.73% year-on-year. Judging from product composition, the company's main product forms include intelligent robots and intelligent monitoring, detection and control equipment. According to the company announcement, the sharp increase in 23Q3 revenue is mainly due to the year-on-year increase in sales of intelligent monitoring, testing and control equipment. In terms of product application industries, the company's products are mainly used in the three major industries of power grids, rail transit, and oil and gas chemicals, mainly in the power grid industry. Considering the implementation of power grid project bidding and project confirmation pace, the company's overall revenue recognition cycle was mostly concentrated in the second half of the year. Last year, due to the epidemic, the pace of grid bidding slowed down, and the company's revenue confirmation cycle was delayed to 22Q4-23Q1. This also increased the company's 23Q3 revenue year-on-year increase to a certain extent. Looking ahead to 23Q4, we believe grid tenders will continue to be implemented, and the company's revenue confirmation is expected to continue to grow.
Profitability has increased significantly, and cost control and product restructuring have gone hand in hand. In 23Q3, the company's overall gross margin and net profit margin were 43.5%/-23.62% respectively, which was a significant year-on-year increase of +25.31/+118.27pct, respectively. In terms of cost control, the sales/management/R&D/financial expense ratio of 23Q3 company was 21.43%/25.34%/31.86%/2.1%, respectively, 33.41/-37.55/-49.02/-0.7 pct. In terms of absolute value, the absolute value of the company's sales expenses and management expenses both decreased significantly year over year, yet R&D expenses were basically the same as last year, reflecting the company's business philosophy of focusing on technology research and development. Judging from the product structure, the company has actively expanded high-margin products represented by intelligent inspection robots in recent years. As of 2022, intelligent inspection robots account for close to half of revenue. We expect that with the continued release of high-margin products, it will also drive the company's overall profit level to increase.
The “sea, land and air tunnels” puzzle is gradually being completed, and rail traffic has created a second growth pole. Based on the traditional power grid industry, the company has actively expanded product application scenarios and application fields in recent years. In terms of application scenarios, the company's products have expanded from inspection to operation, from room temperature to extreme environments, and coverage scenarios have gradually been enriched; in terms of application fields, the company has now continued to expand into industrial fields such as rail transit and oil and gas chemicals. Among them, the rail transit business is a “pioneer” in the company's business development, and trial customers are being converted into actual orders, which is expected to bring revenue confirmation to the company. Furthermore, the company has set up overseas companies and established cooperation with the China Railway Design Institute. Rail transit is expected to become the second growth pole of the company's performance.
Profit forecast: The company's products have achieved a comprehensive strategic layout of “sea, land, air, and tunnels” in the power sector. In the future, while maintaining steady business growth in the power sector, product sales in the rail transit sector are expected to increase significantly, driving the company's performance to continue to grow. We forecast that the net profit of the company from 2023-2025 will be 2.01, 2.73, and 349 million yuan respectively, corresponding to PE 19, 14, and 11 times, respectively. Considering that the company has continued to increase R&D investment in recent years to expand product application areas, and it still takes time for business orders in new fields such as rail transit and oil and gas chemicals to contribute performance, we lowered the company's valuation to 31 times PE in 2023 (previous value was 35 times), corresponding to the target price of 42.30 yuan, and maintain the “buy” rating.
Risk warning: the risk that power grid investment falls short of expectations; the risk of rail transit business expansion falling short of expectations; there is a risk that the public information used in the research report may be lagging behind or not being updated in a timely manner.