Description of the event

The company released its 2023 three-quarter report. The first three quarters achieved revenue of 1,058 million yuan, a year-on-year decrease of 26.63%; imputed net profit of 162 million yuan, a year-on-year decrease of 50.74%; and deducted non-net profit of 142 million yuan, a year-on-year decrease of 53.99%. Split to the third quarter, 23Q3 had revenue of 417 million yuan, down 16.73% year on year, up 15.17% month on month; imputed net profit of 72 million yuan, down 42.08% year on year, up 42.86% month on month; net profit after deducting 65 million yuan, down 43.45% year on year, up 48.87% month on month.

Incident comments

On the revenue side, the company maintained a month-on-month growth trend in the third quarter. As the market gradually picked up, the company's product shipments continued to rise month-on-month. The company's share of overseas business continued to increase in recent years, and is expected to contribute to future performance.

On the profit side, the gross margins for the first three quarters and the third quarter of 2023 were 32.7% and 34.4%, respectively, down 1.6 pct and 1.8 pct from the previous year. In terms of cost rate, the cost rate for the 2023Q3 period was 12.9%, up 3.0 pct year on year, down 1.5 pct month on month; among them, sales expense ratio and management expense ratio were 0.9% and 4.8%, respectively, up 0.1 pct and 2.1 pct, respectively, and were basically the same month over month; R&D expenses were 5.7%, up 1.0 pct year on year, down 0.8 pct month on month; financial cost rate was 1.6%, down 0.2 pct and 0.6 pct month on month, respectively. In the end, net profit of 72 million yuan was realized in the third quarter, and net interest rate reached 17.2%, an increase of 3.3 pct over the previous month. Profitability continued to improve month-on-month, mainly due to the increase in the company's capacity utilization rate and product structure upgrade.

In terms of other financial indicators, the company's net operating cash flow in the third quarter was 95 million yuan, up 113.7% year on year, up 61.9% month on month, mainly due to increased repayment; capital expenditure was 108 million yuan, down 15% year on year, indicating that the company's active production capacity expansion at home and abroad will strengthen the company's carbon tube slurry production capacity supply and global production capacity layout capacity, and contribute considerable future performance growth.

Looking ahead, the company's new product layout is expected to further boost the overall profit level. Businesses such as new highly conductive cathode materials and single-walled carbon tube conductive paste are expected to become new profit growth points. We continue to be optimistic that the company can follow the global leader in carbon nanotube conductive agents and achieve continuous rapid growth with the lithium battery industry. The company's net profit attributable to the parent company's shareholders in 2023 is estimated to be about 260 million yuan, with a corresponding valuation of about 40 times. Maintain a “buy” rating.

Risk warning

1. The sales volume of the electric vehicle industry falls short of expectations;

2. Increased competition has led to profitability falling short of expectations.