Description of the event
2023Q1-Q3 achieved revenue of 400 million yuan, an increase of 21.06% year on year; net profit of 54 million yuan, an increase of 9.53% year on year; net profit after deducting net income of 45 million yuan, an increase of 7.85% year on year. Among them, 2023Q3 achieved revenue of 132 million yuan, a year-on-year increase of 9.04%, a decrease of 20.93%; net profit of 0.18 million yuan, a year-on-year increase of 11.07%, a decrease of 22.51% over the previous year; and net profit after deduction of 12 million yuan, a decrease of 16.93% over the previous year and a decrease of 43.15% over the previous year.
Incident comments
The revenue of 2023Q3 company increased 9.04% year over year, slightly lower than expected. It is estimated that this is due to the fact that the comprehensive solution revenue recognition method is a one-time revenue recognition for completion inspection, revenue recognition was not smooth, and project progress was delayed during the reporting period. The company's comprehensive solution project may be affected by factors such as the degree of technical difficulty, the progress of civil construction delivery for which the owner is responsible, the coordination of relationships surrounding the project, and installation and commissioning time. When demand in the owners' industry declines, the progress of the company's project will be affected.
In 2023Q3, net profit was dragged down by period expenses. The increase in net profit was slightly higher than the increase in revenue, mainly due to increased investment income, asset impairment, and credit impairment recovery. 1) Reduced gross margin and higher cost ratio hampered performance: 2023Q3 company's gross sales margin was 31.1%, down 1.24pct year on year, down 3.96pct from month on month; period expense ratio was 24.81%, up 9.80pct year on year, and 6.68pct over month, of which the management expense rate was 9.4%, up 4.06 pct year over year, and 2.04pct over month. Presumably, the company adjusted its remuneration structure and implemented equity incentive plans amortized share payment expenses during the reporting period; the R&D expense rate was 7.05% , up 2.39 pct year on year; the sales expense ratio was 7.41%, up 2.37 pct year on year. It is estimated that due to the liberalization of the epidemic, travel and other activities have increased; the financial expenses rate was 0.95%, up 0.98 pct year on year.
2) Growth items: The net investment income of 2023Q3 companies was 7.13 million yuan, mainly income from entrusting others to invest or manage assets of 4.45 million yuan; credit impairment was recovered by 780,000 yuan; asset impairment losses were recovered by 3.02 million yuan, increasing profits by a total of 10.94 million yuan.
The 2023Q1-Q3 payout ratio declined. The revenue ratio of 2023Q1-Q3 was 98.53%, down 5.68 pct year on year and 3.83 pct month on month. It is estimated that against the backdrop of declining demand from downstream owners, owners' payment periods were extended; net cash flow balance from operating activities was 34 million yuan, compared to -6.688 million yuan for the same period last year. The balance ratio at the end of 2023Q3 was 31.46%, a year-on-year decrease of 11.75 pct and an increase of 1.54 pct over the previous month.
New technology, new model, or contribution to increased performance. 1) New technology: The company's prospectus R&D project lays out waste acid treatment and metal material recovery in the new energy industry to help achieve recycling of metals such as copper, lithium, cobalt, nickel, etc.; 2) New model: According to the prospectus, the company achieves targeted adsorption of rare metals such as rhenium in sewage waste water through technology research and development, and recovers valuable resources such as sodium chloride, sodium sulfide, sodium sulfate, sulfuric acid, hydrochloric acid and hydrofluoric acid in the future.
Profit forecasting and valuation: Company equity incentive plan to fully motivate employees. In 2023, the copper, lead and zinc industry began to implement special emission limits. Environmental inspections, soil surveys, and the heavy metals incident in Jiangxi all contributed to the release of market space in the industry. The company is a leading enterprise in heavy metal pollution control and is expected to benefit. It is estimated that the company's net profit from 2023-2025 will be 0.80/1.15/152 million yuan, +20.1%/44.0%/33.0% over the same period last year, and the PE valuation is 38.9x/ 27.0x/20.3x, maintaining the “buy” rating.
Risk warning
1. The risk of iterative technology upgrades; 2. The risk of sustainability of operating service projects.