Event: Hongchuan Wisdom announced 2023Q1-Q3 results. In 2023Q3, the company achieved revenue of 390 million yuan, +16.6% year-on-year; realized net profit of 80.58 million yuan, +34.8% year-on-year; and achieved net profit of 76.71 million yuan, +31.0% year-on-year. The 23Q1-Q3 company achieved revenue of 1.16 billion yuan, +23.8% year-on-year; realized net profit of 240 million yuan, +31.1% year-on-year, and net profit margin of 20.7%; realized net profit of 230 million yuan, +28.3% year-on-year, and net profit margin of 19.9%.

The performance of mergers and acquisitions in production capacity was realized, and revenue and profit increased year over year. In 2023Q3, the company achieved revenue of 390 million yuan, +16.6% year-on-year; gross profit of 230 million yuan, +22.8%, gross profit ratio of 59.5%, year-on-year +3pp, year-on-year net profit of 80.58 million yuan, +3pp, year-on-year net profit of +34.8%, net profit margin of 20.8%, and net profit margin of 20.8%, +2.8pp year-on-year; achieved net profit of 76.71 million yuan, +31.0% year-on-year. In 2023Q1-Q3, the company achieved revenue of 1.16 billion yuan, +23.8%, gross profit of 690 million yuan, +25.9%, gross profit ratio of 59.4%, year-on-year +1.0pp; net profit margin of 240 million yuan, +31.1% year-on-year, and net profit margin of 20.7%, year-on-year +1.1 pp. The company's revenue increased significantly, mainly due to revenue growth brought about by the merger of Longxiang Group, Cangzhou Hongchuan, Jinlianchuan, and the “Gangfeng Petrochemical Warehousing Project” phase II project in April, July, and November 2022, respectively. The revenue growth rate declined slightly from 23Q2 (18.2%) over the previous month, mainly due to pressure from downstream demand, and fluctuations in rental rates due to insufficient operating rates.

The asset transfer was completed in October, and the release of 23Q4 results can be expected. According to the company's announcement on October 11, the company announcement has completed the asset transfer for the Nantong Yushun and Nantong Yusheng acquisition projects. The project has total tank resources of 617,000 square meters, 1 30,000 tonne terminal, 72 storage tanks, and a single tank volume ranging from 15 to 130 million cubic meters; the 2021/2022 operating income of the project is 150 million yuan/140 million yuan, net profit of 6074.5/34326 million yuan. Considering the 22-year rental rate of the project (57.6%), we can see that the project's 22-year rental rate (57.6%) is under pressure. It contributed 38.112 million yuan in revenue in a single quarter, and contributed an average profit of 15.186 million yuan in a single quarter.

Profit forecasts and investment advice. The 23Q1-Q3 performance showed that the company's operations were resilient under fluctuations in upstream demand. The company's tank business had high barriers, continuous extension mergers and acquisitions combined with strong management integration capabilities. Considering that some of the company's storage business was affected by demand pressure, the company's 2023/24/25 was slightly adjusted to 3.2/5.0/600 million yuan (previous value: 3.6/5.0 billion yuan), maintaining 25 times the company's 2024 PE, corresponding target price of 27.59 yuan, maintaining “buying”.