Net profit for 23Q1-3 increased by nearly 10% year over year, and cash flow continued to improve. The company released its three-quarter report for 2023:23Q1-3 achieved revenue of 400 million yuan (+21.06% yoy), net profit of 54 million yuan (+9.53% yoy), net profit of 54 million yuan (+9.53% yoy); revenue for the third quarter was 132 million yuan (+9.04% yoy) and net profit of 0.18 billion yuan (+11.07% yoy). The increase in acceptance projects for comprehensive solutions for heavy metal pollution prevention and control led to steady revenue growth; 23Q1-3 gross margin reached 32.61%, and net profit margin fell slightly to 13.6% year-on-year, mainly due to the company's sales expense ratio, management expense ratio, and R&D expense ratio rising to 5.90, 8.05, and 6.29% respectively. The company strengthened repayments, and the net operating cash flow for 23Q1-3 reached 34.22 million yuan (-6.61 million yuan for the same period last year).
Downstream continues to expand, and with the help of two shareholders, high growth can be expected. According to the interim report, the company has strengthened its expansion in the field of new energy and new materials. The number of orders for 23H1 integrated heavy metal wastewater treatment equipment and other equipment reached 10, with an amount exceeding 30 million yuan (+33% over the same period last year). Notably, according to the interim report, in 2023, the company expects to generate related sales revenue of 350 million yuan with the two shareholders (21.22% as of 23Q3) and their related parties, and 23H1 has already generated related sales revenue of 72.46 million yuan (+32.79% year-on-year), and is looking forward to subsequent cooperation and development between the two sides.
Equity incentives demonstrate confidence in development, and the blue ocean market for self-disposal of heavy metal hazardous waste has great potential. According to the 2023 stock incentive plan, the company's 2022-2025 compound revenue growth target is 39.6%.
We estimate that the EPC and operating markets for sewage wastewater treatment in the non-ferrous industry exceed 4 billion yuan and 17.3 billion yuan/year respectively, and that 90% of the stock market is traditional processes. According to the company's prospectus, the company's market share in new expansion and technical improvement projects reached 62.3% in 2021, demonstrating competitive strength.
Profit forecasts and investment advice. Net profit for 23-25 is expected to be 0.90/1.35/197 million yuan, corresponding to the latest PE 35.66/23.65/16.19 times. The company has advanced technology, combined with the resources of two shareholders, and the high growth trend has not changed; referring to comparable companies, we gave the company 25xPE for 24 years, corresponding to a reasonable value of 35.60 yuan/share, maintaining a “buy” rating.
Risk warning. Risk of changes in industry policies, risk of technology iteration, risk of loss of technical personnel, etc.