Description of the event
2023Q1-Q3 achieved revenue of 14.263 billion yuan, an increase of 20.57% over the previous year; net profit of 987 million yuan, a decrease of 5.41% over the previous year; net profit after deduction of 788 million yuan, a decrease of 15.96% over the previous year. Among them, 2023Q3 achieved revenue of 4.91 billion yuan, an increase of 21.93% over the previous year; net profit of 239 million yuan, a decrease of 38.28% over the previous year; and net profit after deducting non-return mother's net profit of 277 million yuan, a decrease of 22.08% over the previous year.
Incident comments
2023Q3 revenue was +21.93% year-on-year. The difference between net and non-performance growth and revenue growth was mainly affected by categories such as gross profit margin, investment income, changes in fair value, and asset impairment. Revenue growth is estimated to be due to an increase in the capacity utilization rate of hazardous waste sector projects and an increase in production and sales volume. Net profit attributable to 2023Q3 companies decreased by 38.28% year-on-year, mainly due to: 1) Gross margin drag:
Gross margin was 11.89%, down 5.86pct year on year and 1.94pct month-on-month, presumably related to the decline in prices of some rare precious metals. According to Yangtze River non-ferrous market data, the price of 2023Q3 nickel plate/cobalt/palladium showed a downward trend, falling 8.0%/21.2%/37.1% year on year respectively. The company had a production and operation cycle from procurement to sales, and the narrowing of the purchase and sales price difference dragged down profitability; 2) Investment loss dragged down profitability; 2) Loss on investment income: 2023Q3's net investment income was -167 million yuan, compared to -0.14 billion yuan in the same period last year. 3) Enhancement items: 2023Q3 asset impairment losses recovered $49 million, up $91 million year-on-year, estimated to be inventory price declines and contract performance costs recovered; 4) Enhancement items: 2023Q3's net profit from changes in fair value was $72 million, up $84 million over the same period last year, mainly hedging gains and losses.
Excluding any influence from the management side, net profit attributable to Q3 fell 37.4% year on year. 2023Q3 In addition to the effective hedging business related to the company's normal business operations, the fair value variable profit and loss from holding transactional financial assets, transactional financial liabilities, and investment income from disposal of transactional financial assets, transactional financial liabilities, and marketable financial assets was -85 million yuan, compared to -11 million yuan in the same period last year. Excluding this factor and the impact of asset impairment losses, net profit from the Q3 management side fell 37.4% year on year.
Good cash flow. The net cash flow from operating activities of 2023Q1-Q3 was 779 million yuan, which was positive year on year, mainly due to an increase in net margin income and expenditure for hedging business; the income ratio was 108.9%, down 1.31 pct from the previous year, maintaining a good state of repayment.
The company's balance ratio at the end of 2023Q3 was 50.19%, a year-on-year decrease of 2.05pct.
Pumped storage is booming and nuclear power construction is accelerating, and the company's orders are welcoming a new round of growth. 1) Savings: The company signed cooperation agreements with large power groups such as Huarun and Huaneng and private enterprises with resources such as Wanliyang (Jiangshan Pumped Storage); 15 units/year hydropower equipment production capacity is under construction, of which 5 sets (sets) of pumped storage generator sets per year in Tonglu, Zhejiang, and the Yichang Government and the Three Gorges Group collaborated in January 2023 to promote the construction of 10 units/year of hydropower equipment production capacity in Yichang City. 2) Nuclear power: The company has outstanding R&D capabilities in the field of nuclear power. Huadu is one of the main designers and manufacturers of control rod drive mechanisms for nuclear first-class equipment in nuclear reactors in China. It led the successful trial operation of the 600MW fourth-generation commercial fast reactor liquid metal core main pump engineering prototype. The company is currently constructing a nuclear power equipment project with an annual production of 7 units (sets), and signed a new 1.026 billion yuan control rod drive mechanism (CRDM) equipment supply contract in March 2023. In the context of the construction of six nuclear power unit projects approved by the state, the company's nuclear power business is expected to open up room for subsequent growth.
The company's net profit from 2023-2025 is estimated to be 13.8/15.6/1.78 billion yuan, respectively, -5.7%/+13.0%/+14.1% year-on-year, corresponding to PE 14.1x, 12.4x and 10.9x, maintaining the “increased holdings” rating.
Risk warning
1. Risk of metal price fluctuations; 2. Policy risk.