Description of the event

The company disclosed its three-quarter report for 2023. The first three quarters achieved revenue of 1.87 billion yuan, a year-on-year increase of 24.6%, net profit of 200 million yuan, a year-on-year decrease of 0.9%; split to Q3, achieved revenue of 650 million yuan, a year-on-year increase of 7.0%, a year-on-year increase of 2.0%, and net profit of 0.6 billion yuan, a year-on-year decrease of 33.4%, a year-on-year increase of 53.9%.

Incident comments

On the revenue side, the company as a whole maintained a relatively rapid growth trend. By business, at this stage, the company focuses on power engineering construction services and power equipment supply (including high and low voltage distribution cabinets, circuit breakers, energy storage, and charging piles). It is expected that the energy storage EPC business will advance rapidly and the equipment supply business will grow significantly; the company is actively expanding the photovoltaic storage and charging station business, with projects under construction concentrated in Jiangsu, and is also actively expanding markets outside the province. In recent years, the company's share of business outside the province has continued to increase, and is expected to contribute to performance in the future.

On the profit side, the gross margins of 2023Q1-3 and Q3 were 21.5% and 19.1% respectively, down 6.0 pct and 11.0 pct from the previous year. It is expected to be affected by changes in the pace of settlement confirmation for some projects. In terms of cost rates, the cost rates for the 2023Q1-3 and Q3 periods were 9.7% and 10.2%, respectively, down 1.9 pct from the previous year, and remained flat; among them, the sales expense ratio, and the R&D expense rate for Q1-3 were 1.9%, 4.5%, and 3.3%, respectively, down 0.5 pct, 0.8 pct, and 0.6 pct, respectively. The financial expense ratio was about 0.01%, a slight decrease over the previous year; the Q3 sales expense ratio was 2.0%, down 0.4 pct from year on year, up 0.4 pct from month to month. The management fee rate was 0.4 pct over the previous year, up 0.4 pct from month to month. The management cost rate was 4.2%, down 0.2 pct year on year, basically the same month on month. The R&D expense rate was 3.9%, up 0.6 pct year on year, 1.0 pct over month, financial expenses were 0.03%, down 0.1 pct year on year, and 0.2 pct month on month.

In the end, net interest rates for 2023Q1-3 and Q3 were 10.9% and 10.0% respectively, down 2.8 pct and 6.0 pct from the previous year.

At the same time, the company issued an announcement on the actual controller's proposal for the company to repurchase shares. The source of the repurchase capital is the company's own capital. The repurchase amount is not less than 30 million yuan and no more than 60 million yuan (all inclusive), which will be used for employee stock ownership plans or equity incentives, demonstrating firm confidence in the company's future development.

Looking ahead to the fourth quarter, the company's new orders will continue to grow rapidly, which will strongly support the achievement of the annual performance target. The company continues to strengthen repayment management, and the size of accounts receivable is under control. We expect Q4 to usher in a significant recovery at the operating level. In addition, the company is actively developing new businesses, and charging stations, electricity consumption operations, and international business are expected to bring new growth points. It is estimated that the company's net profit will be 350 million yuan in 2023, with a corresponding valuation of about 19 times. Maintain a “buy” rating.

Risk warning

1. Macroeconomic downside risks;

2. Increased risk of market competition;

3. The repayment falls short of the expected risk.