Event: The company released its 2023 three-quarter report. In 3Q23, the company achieved revenue of 97 million yuan, +2.8% year-on-year, and net profit of 115 million yuan, -3.0% year-on-year. From 1 to 3Q23, the company achieved a total revenue of 290 million yuan, +23.2% year-on-year, and net profit of 38 million yuan, +69.5% year-on-year.
Various departments emphasize the recycling of sewage, and the membrane industry is expected to explode rapidly. In September of this year, seven departments, including the Development and Reform Commission, the Ministry of Water Resources, and the Ministry of Ecology and Environment, issued a joint document emphasizing strengthening the conservation and intensive use of water resources. It is clearly necessary to carry out pilot projects for reclaimed water utilization in typical regions; implement regional reclaimed water recycling projects; build centralized or distributed sewage collection and recycling facilities in water-scarce regions according to local conditions; and by 2025, the utilization rate of reclaimed water in water-scarce cities at prefectural level and above will reach more than 25%. It is expected that a large number of reclaimed water projects will commence in various regions, thereby driving demand for membrane components. The company's profit level may be rapidly increasing, driven by favorable factors in terms of market size expansion and domestic substitution.
The fund-raising project is about to be put into production, waiting for production capacity to climb to increase profits. Referring to the company's announcement, the company's three major fund-raising projects: the annual output of 300,000 composite pressure tanks and 20,000 membrane element pressure vessels, the expansion project of the production line with an annual output of 100,000 membrane components, and the R&D center construction project will all reach the intended state of use in December this year. It is expected that the scale effect of the company will become more obvious after production is put into operation, and the unit production cost may be further reduced. At the same time, the ability to obtain orders is expected to continue to increase.
Investment recommendations and valuation: The company's 2023-2025 operating income is estimated to be 421 million yuan, 639 million yuan and 768 million yuan, respectively, with growth rates of 36.5%, 51.9% and 20.2% respectively, and net profit of 53 million yuan, 106 million yuan and 140 million yuan respectively, with growth rates of 70.1%, 98.5% and 32.4% respectively, maintaining the “increase in holdings” rating.
Risk warning: the risk of overseas sales revenue being relatively high, the risk of increased market competition, the risk of raw material supply and price fluctuations, etc.