Taijia Co., Ltd. released its three-quarter report for 2023. In the first three quarters of 2023, the company achieved revenue of 1,410 billion yuan, +207.6%, net profit of 103 million yuan, +6.8%, net profit after deduction of net profit of 80 million yuan, +7.0% year-on-year; in the single quarter, 23Q3 achieved revenue of 464 million yuan, +173.2%, net profit of 42 million yuan, -23.3% year-on-year. We maintain the company's 2023-2025 net profit forecast of 1.48/2.52/325 million yuan, which is +13.8%/+69.8%/+29.0%, respectively. The closing price on November 2, 2023 corresponding to 2023-2025 PE was 38.6/22.6/17.9 times, respectively, giving it a “hold” rating.

Profitability improved month-on-month, driven by a recovery in consumer electronics. The company's gross margin for the first three quarters of 2023 was 17.98% and net profit margin was 6.84%. Compared with the figures of 41.01% and 20.90% in the first three quarters of 2022, the company completed a major asset restructuring of Platinum Electronics at the end of September 2022, while the profitability of the combined power supply business was relatively low. In Q3, the company's gross margin and net profit margin were 17.30% and 8.06% respectively, and in Q2, +0.45pct and +3.75pcts respectively. With the recovery in consumer electronics demand and the volume of new energy power supply business, the company's power supply foundry business is expected to continue to benefit, driving a gradual improvement in profitability.

Net profit declined year over year or due to phased factors, Q4 is expected to resume year-on-year growth. The company's net profit for the 2023Q3 single quarter was 42 million yuan, -23.3% year-on-year, mainly affected by the high base for the same period last year. The net profit for the 2022 Q3 quarter was 54 million yuan, +221.4% year-on-year, gross margin was 46.12%, and net profit margin was 31.88%, mainly due to the sharp increase in the company's high-margin bimetallic band saw blade exports in 2022, the increase in exchange income brought about by the appreciation of the US dollar, and the sharp increase in investment income brought about by the appreciation of the US dollar, and the sharp increase in investment income brought by Platai Electronics at the end of 2022/3 (first three quarters of 2022) Investment income of 30.56 million yuan, +40706.69% year-on-year) is due to factors such as.

The performance after entering 2023Q4 is comparable to the same period last year. The phased factors have been eliminated. Along with the recovery in consumer electronics demand and the expansion of the new energy power supply business, performance is expected to resume year-on-year growth.

Risk factors: Overseas business expansion falls short of expectations; market demand for bimetallic band saw blades falls short of expectations; revolutionary technology has emerged in the industry; product development and iterative upgrades have fallen short of expectations; power supply business development falls short of expectations; industry competition is intensifying.

Profit forecast, valuation and rating: The company is a leading domestic bimetallic band saw blade company, with market share ranking first in China and the top three in the world. Since acquiring the power supply business in 2022, it has launched a “sawing and power supply” dual business development model, with fixed growth and expansion of the additional band saw blade and new energy power supply business, with broad prospects for future growth. We maintain that the company's net profit forecast for 2023-2025 is 1.48/2.52/325 million yuan, a year-on-year difference of +13.8%/+69.8%/+29.0%, respectively. The 2023-2025 PE corresponding to the closing price on November 2, 2023 was 38.6/22.6/17.9 times, respectively. Recently, due to the large increase in stock prices catalyzed by industry chain conditions, we did not target prices for the time being, and gave them a “hold” rating.