Description of the event

The company released its three-quarter report. In the first three quarters of 23 years, it achieved revenue of 2,047 billion yuan, -14.41% year-on-year; realized net profit of 301 million yuan, +6.80% year-on-year; and achieved net profit deducted from non-return mother of 291 million yuan, -2.42% year-on-year.

Looking at a single quarter, 23Q3 achieved revenue of 730 million yuan, -28.46% year-on-year; realized net profit of 106 million yuan, -17.43%; and achieved net profit of 108 million yuan, -12.71% year-on-year.

Incident comments

The main business is growing steadily, and the increase in the company's overall profit level is mainly due to business restructuring. On the revenue side, the year-on-year decline in the company's Q3 revenue was mainly due to last year's high base, with steady month-on-month growth. In terms of gross margin, the company's Q3 gross margin was 57.47%, an increase of 14.2 pct over the previous year, which was basically the same over the previous month. Judging from this, the company's new energy EPC business has basically not confirmed revenue. The company's engineering revenue mainly comes from the new energy EPC business, and gross margin is relatively low. Construction is expected to be concentrated in Q4. The gross margin for the first three quarters of 2023 reached 57.42%, up 11.4pct year on year; net profit margin reached 14.96%, up 3.2 pct year on year. The net interest rate for Q3 alone was 14.87%, up 2.2 pct from the previous year. The main factors are: 1) the impact of the pace of new energy EPC business revenue confirmation; 2) the increase in the cost rate for the period. The fee rate for the 23Q3 period was 40.50%, an increase of 12.3 pct over the previous year. Among them, the sales/management/R&D/finance expense ratio was +6.3 pct/+2.9pct/+2.6 pct/+0.5 pct, respectively.

Actively implement equity incentives to bind the company's core talents. The company announced the equity incentive plan (draft) on September 22 and agreed to grant 6655 million restricted shares to 219 incentive recipients. The number of incentives accounted for about 10% of the company's total number of people.

The assessment year is the three fiscal years 2023-2025. The assessment requirements for the first category of incentive targets are that the company's cumulative net profit as of 23/24/25 is not less than 3.89, 7.97, and 1,226 billion yuan respectively, and the assessment requirements for the second category of incentive targets are not less than 10 million yuan, 47 million yuan, and 100 million yuan, respectively, for the second category of incentive targets. The company binds core talents through an equity incentive plan, which is expected to help the company's long-term performance grow.

The security intelligent management and control system helps the company's strategic transformation. The operating income of the “SCS Safety Intelligent Control System” launched by the company in 2019 with independent research and development and independent intellectual property rights increased by nearly 50% for three consecutive years. With the rapid development of the service market, the company is expected to strategically transform from a single “equipment manufacturer” to a “production-oriented safety service provider”, and profitability is expected to further increase. It is estimated that in 2023-2025, the company will achieve net profit of 4.3, 52, and 650 million yuan, corresponding to PE of 14, 12, and 9 times, maintaining the “buy” rating.

Risk warning

1. The risk that the development of emerging fields falls short of expectations;

2. The risk that the global layout falls short of expectations.