Event: The company announced its 2023 three-quarter report. The first three quarters achieved operating income of 2,795 billion yuan, an increase of 32.35% over the previous year, net profit of 423 million yuan, an increase of 20.61% over the previous year, and net profit of 368 million yuan after deducting non-return mother's net profit of 368 million yuan, an increase of 7.92% over the previous year. In a single quarter, 2023Q3 achieved operating income, net profit from net income, net profit from non-return net profit of 814 million yuan, 125 million yuan, and 93 million yuan, -4.73%/+2.84%/-23.27% year-on-year, and -21.56%/-19.14%/-34.37% over the same period last year.

Comment: Contract liabilities have increased dramatically, and the boom in aerospace forgings can be expected. On the revenue side, the company achieved revenue of 2,795 billion yuan in the first three quarters, an increase of 32.35% over the previous year, mainly due to growth in aviation, petrochemical and power forging businesses. On the profit side, the company achieved net profit of 423 million yuan in the first three quarters, an increase of 20.61% over the previous year. The net profit margin for the first three quarters was 15.15%, down 1.47% from the same period last year. Net profit growth in the first three quarters fell short of revenue growth, mainly due to (1) a slight decline in gross margin, down 0.42pct to 25.49% from the same period last year, Q3 single-quarter gross profit margin of 22.50%, down 1.85% year on year, down 4.58% from month on month; (2) period expenses increased, up 0.62 pct to 7.92% over the same period last year, of which sales/management/R&D/finance expense ratio was +0.32/+0.09/0.40/-0.19pct to 1.65%/2.06%/2.06% 4.46%/-0.24%. On the balance sheet side, the company's inventory book value at the end of the period was $958 million, up 6.74% from the beginning of the year; accounts receivable and notes receivable were $1,859 million, up 75.09% from the beginning of the year; advance payments of $121 million, down 35.47% from the beginning of the year; contract liabilities of $59 million, a sharp increase of 146.16% from the beginning of the year, mainly due to increased pre-revenue due to business growth, or reflecting sufficient order reserves; on the cash flow sheet, net operating cash flow was -0.7 billion yuan, the same period last year, capital management There have been improvements.

Profit forecast and investment suggestions: EPS is expected to be 5.16, 6.57, and 8.11 yuan/share in 23-25.

Combining downstream sentiment and competitive advantages, and referring to comparable company valuations, the company was given a PE valuation of 23 times 20 times, corresponding to a reasonable value of 103.29 yuan/share, giving it an “increase in holdings” rating.

Risk Alerts: Industry Policy Adjustments; Low Downstream Equipment Demand Expectations; Raw Material Price Fluctuations, etc.