Events: The company's 2023Q1-3 revenue was 1,910 billion yuan, up 20.26% year on year; imputed net profit was 95 million yuan, up 731.11% year on year; net profit after deducting non-return mother was 79 million yuan, up 3594.91% year on year. Among them, in Q3, the company's revenue for the single quarter was 789 million yuan, up 32.93% year on year; imputed net profit was 47 million yuan, up 93.89% year on year; net profit after deducting non-return mother was 36 million yuan, up 81.72% year on year.
Cost empowers terminal competition, and revenue performance in the Q3 quarter both increased. The Yongkang plant base of the company's headquarters began to be strengthened in 2021, and the actual production capacity in 2022 was 840,000 tons. In 2023, its production doubled, and the margin of depreciation expenses dropped sharply. The decline on the cost side has also brought the company the competitiveness of terminal products. In the engineering field, the company relied on cost advantages to further expand its business scale, and the delivery growth rate has further increased since the second half of the year. And as the scale of business increases, the scale effect of the company may continue to increase, and profit elasticity will also be released.
The revenue performance of 2023Q3 company both increased, with year-on-year increases of 32.93% and 93.89%, respectively.
The increase in production capacity was compounded by the scale effect, and the company's profit margin improved month-on-month. The gross margin of 2023Q3 company was 27.91%, up 1.76pct from the previous month; the net profit margin was 5.83%, up 1.37pct from the previous month. The year-on-year increase in gross margin and net profit margin was mainly due to a marginal decline in production capacity climbing costs. At the same time, there was obvious cost amortization under the scale effect. Looking specifically at the cost side, the 2023Q3 company's fee rate for the period was 18.63%, an increase of 0.25pct over the previous year.
Among them, the sales expense ratio was 13.31%, up 2.01pct year on year, the management expense ratio (including R&D) was 5.45%, down 1.80 pct year on year, and the financial expense ratio was -0.13%, up 0.04pct year on year.
The customer structure is optimized to control risk, and cash flow continues to improve. Net cash flow from operating activities of 2023Q1-3 companies was $167 million, compared to $131 million for the same period in 2022, an increase in net inflows of $298 million; 2023Q1-3 accounts receivable and notes were $1,088 million, compared to $1.102 billion for the same period in 2022, a year-on-year decrease of $14 million. The company optimizes customer structure, improves risk control capabilities, strengthens cash flow management, and continuously improves cash flow.
Low concentration determines future growth space, and urban villages support the needs of the industrial chain. The overall security gate market space exceeds 10 billion dollars. The market share of leading brands is low, and there is plenty of room for market share to increase. However, due to the double impact of the epidemic and real estate in recent years, the liquidation of small enterprises has accelerated. Although leading companies have also been damaged, they have maintained steady development. In the future, leading brands may continue to increase their market share through their comprehensive strength. At the same time, urban village renovation policies have been gradually introduced since July, and real estate policies have continued to be strengthened. Recently, the funding source for urban villages has also been clarified as special debt. Next year, with the support of special bonds, urban village renovations will be implemented at an accelerated pace to support local real estate demand, thus gradually reversing the previously pessimistic expectations for home purchases, and the development of the industrial chain has returned to normal.
Investment suggestions: We expect the company to achieve imputed net profit of 1.54/2.25/318 million yuan in 2023-2025, respectively. The latest closing price corresponding to PE is 28x/19x/14x, maintaining the “increased holdings” rating.
Risk warning: downside macroeconomic risk, real estate decline exceeding expectations, risk of rising steel prices.