Event: The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved revenue of 1,265 billion yuan, +5.61% year-on-year, and net profit of 117 million yuan, -18.65% year-on-year. Among them, the third quarter achieved revenue of 443 million yuan, +8.79% year-on-year, -0.26%; net profit of 36 million yuan, +5.28% year-on-year, and -24.99% month-on-month.
The main business is growing steadily, and new products contribute additional volume. The company's main business grew steadily in the first three quarters, achieving revenue of 1,238 billion yuan, an increase of 6.01% over the same period last year. Among them, revenue from clean air products increased 2.79% over the same period last year, and 9.13% after deducting Yuyuan's export revenue; revenue from energy-efficient products increased 11.63% over the same period last year. The company's R&D investment continues to increase, and the application layout of “mobile dust-free space” and “fixed dust-free space” continues to increase. New products contributed additional volume, and new products such as automotive oil filter products and construction glass wool became new growth points for the company's revenue.
The decline in profit narrowed year over year, and Q3 gross margin improved. The company's net profit for the first three quarters of 2023 still declined year-on-year, but the decline narrowed. The main reasons for the decline in profit in the first three quarters were: (1) construction capacity was not fully released, fixed costs increased, and unit product costs rose; (2) downstream demand was weak, product structure changed, and upstream commodity raw material prices continued to be high; (3) the repayment period for some equipment projects did not arrive, accounts receivable balances increased, and accrued impairment losses increased by about 1.07 million yuan year-on-year. The company's gross margin for the first three quarters of 2023 was 24.75%, -2.64pcts year-on-year. The company's gross margin improved both year-on-year and month-on-month in the third quarter. Gross margin was 25.93%, +1.74pcts, +0.73pcts month-on-month; net margin was 8.90%, +0.38pcts year-on-month, and -3.03 pcts month-on-month.
Expand the NEV sector and increase the scale of global business. In order to accelerate the expansion of the company's main material products in the field of mobile space such as new energy vehicles, the company signed an “Equity Purchase Agreement” with MANN+HUMMEL Singapore Holdings to transfer 70% of its shares in Suzhou Youyuan Environmental Technology Co., Ltd., a wholly-owned subsidiary, to MANN+HUMMEL Singapore Holdings. MANN+HUMMEL Group is the world's leading provider of filtration technology solutions. After the transaction is completed, the company and MANN+HUMMEL Group will work together to innovate and develop clean air filtration products, which have a very good synergy with complementary brands, product development, and market development. At the same time, it will further expand the scale of the long-standing environment and enhance technical strength, which will help the company expand its layout in the NEV sector and increase the company's global business scale.
Profit forecast and investment suggestions: The company is a leader in the field of filter materials in China, and is one of the few companies in the world that can simultaneously provide various filter materials such as high-performance glass fiber filters, low-resistance meltblown filters, high-efficiency PTFE membranes, microelectrostatic filter materials, and chemical filter materials. The company focuses on the two major business segments of clean air and high efficiency and energy efficiency, and is widely used downstream, optimistic about developing new application scenarios, and gradually achieving localized replacement. The company has a global layout and is optimistic about long-term development.
We forecast net profit for 2023-2025 to be 171 million, 232 million, and 275 million respectively, corresponding to current PE of 27.24 times, 20.15 times, and 17.01 times, respectively, maintaining the “buy” rating.
Risk warning: downstream demand falls short of expectations, new business progress falls short of expectations, capacity release falls short of expectations, raw material price fluctuations, etc.