Maintain an increase in holdings. Performance fell slightly below expectations due to reduced exchange gains and losses and increased management expenses in the third quarter, but overseas and overseas project settlements are expected to accelerate in the fourth quarter, maintaining the forecast that EPS of 0.55/0.66/0.79 will increase 25/20/ 18% in 2023-2025. Maintain 27.5 times the PE valuation in 2023 and maintain the target price of 16.22 yuan.
Net profit increased by 13.1% in the first three quarters, slightly lower than expected, and operating income increased 10.7%. (1) Revenue for the first three quarters increased 10.7% after adjustments of RMB 4.21 billion, Q1-3 increased 9.8/8.8/ 13.4% for the single quarter, net profit of RMB 200 million increased 13.1%, Q1-3 increased by 31.9/15.1/ 0.7%, and net profit after deducting RMB 180 million increased 2.2%. (2) The gross profit margin for the first three quarters was 13.74% (+1.01pct), the comprehensive expense ratio was 8.51% (+2.09pct), the net profit margin was 4.69% (+0.10pct), the weighted ROE 11.15% (+0.02pct), and the debt ratio was 66.73% (-6.12pct).
Operating cash inflows in the first three quarters were lower year over year, and accounts receivable increased by 4.6%, impaired, and returned to $23 million. (1) Net operating cash flow for the first three quarters was 90 million yuan (590 million yuan for the same period last year), Q1-3 was -3.4/1.5/280 million yuan (-2.5/61/230 million yuan for the same period last year); Q3 had a quarterly revenue ratio of 114% (141% for the same period last year), and a payout ratio of 84% (107% for the same period last year). (2) Accounts receivable at the end of the third quarter were 600 million yuan, up 4.6% from the end of 2022, and impairment in the first three quarters reverted back to $23 million (-22 million yuan for the same period last year).
New orders signed in the first three quarters fell 25% year on year, with orders for new energy and new materials increasing 60%. (1) New signings of 5.64 billion yuan in the first three quarters decreased by 25%. Among them, pulp and paper/food fermentation/environmental protection/new energy materials increased by 144/8.6/7.8/78/710 million yuan -6/-41/60% respectively. (2) In August 2023, it successfully raised a fixed increase of 413 million yuan for digital transformation and “double carbon” science and technology innovation center projects. (3) In December 2022, 5.26 yuan/share was used to grant equity incentives. The 2023-2025 non-ROE deducted was not less than 10.65/11.09/ 11.62%, and the compound increase in operating profit (based on 2021) was not less than 10.58/10.88/ 11.00%.
Risk warning: macroeconomic policies have been tightened beyond expectations, infrastructure investment has fallen short of expectations, etc.