Events: The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved revenue of 290 million yuan, -25% year-on-year; net profit of the mother - 190 million yuan, -104%; net profit after deducting non-return net profit - 230 million yuan, -131% year-on-year. On a quarterly basis, the company achieved revenue of 140 million yuan in Q3 of 2022, +15%/+33%; net profit of 120 million yuan, -237%/-208% over the same period; net profit after deduction of 110 million yuan, -179%/-35% over the same period.

Gross margin improved month-on-month, and loss in Q3 increased due to depreciation and amortization & bad debt preparations. The gross profit margin of the 3Q23 company was 39%, -6.0/+1.9pcts over the same period; net profit of the company decreased by 0.8 billion yuan year-on-year, mainly due to:

1) The company's operating scale continued to expand, and the increase in expenses such as depreciation and amortization of long-term production and operation assets led to a year-on-year increase of 0.7 billion yuan in sales, management and R&D expenses. The corresponding quarterly sales/management/R&D expense rates were 19%/43%/36%, respectively, +8.0/-3.7/+15.0pcts; 2) The company's credit impairment losses due to bad debt preparations on customer accounts receivable increased by 0.6 billion yuan year-on-year.

The advantages of fuel cell leaders are stable, and the upward layout has built an independent industrial chain. According to data from the China Automobile Association, from January to September 2023, domestic fuel cell vehicles sold 30,000 units, +37.3% over the same period last year, and continued to maintain a high growth rate. In September, the domestic hydrogen fuel cell vehicle installed volume was 35.79 MW. The company ranked first in the industry, with an installed capacity of 13.29 MW, accounting for 40%. As a leading domestic fuel cell system manufacturer, the company has a product range covering 30-240kW. It maintains close cooperation with leading commercial vehicle companies such as Yutong Bus and Beiqi Foton. It has launched operations in model urban agglomerations such as Beijing and Shanghai, achieving full coverage of land transportation application scenarios. Currently, core components such as electrodes, bipolar plates, electric stacks, and BOP are 100% localized, and it has a complete testing system for fuel cell systems and key valves. At the same time, hydrogen energy technology has been established to focus on the efficient coupling of renewable energy with electrolyzed water to hydrogen production and comprehensive utilization technology research on green hydrogen production, accelerating the layout of upstream hydrogen production and making the entire industry chain autonomous and controllable.

Investment advice: I am optimistic that the company will lead the implementation of localization & commercialization as a fuel cell leader. The company's 2023-2025 revenue is estimated to be 8.1/12.7/2.24 billion yuan, and net profit is -1.8/-0.6/0.7 billion yuan, maintaining the “buy” rating.

Risk warning: fuel cell policy falls short of expectations; technology implementation falls short of expectations; commercialization falls short of expectations.