Core views:

The company released its three-quarter report for 2023, and the results continued to exceed expectations. 23Q1-3 achieved operating income of 650 million yuan, +13.1% year on year; net profit to mother of 80 million yuan, -45.8% year on year; deducted non-net profit of 0.7 billion yuan, -2.3% year on year; the company's comprehensive gross margin was 34.8%, +5.1 pct year on year, mainly due to a sharp recovery in overseas business profitability; the company's cost ratio was 21.7%, +7.0 pct year on year, mainly affected by exchange rate fluctuations and equity incentives. 23Q3 achieved operating income of 250 million yuan, +46.4% year over year; realized net profit of 0.3 billion yuan, +42.8% year over year; deducted non-net profit of 0.2 billion yuan, +17.3% year over year; and the company's profit growth for the third quarter exceeded the upper limit of the performance forecast.

The wear-resistant spare parts business grew rapidly, and profit margins improved marginally. 23Q1-3's revenue from mining rubber composite spare parts was +19.7% year-on-year, mainly due to a significant increase in mineral processing equipment, which included a set of rubber composite spare parts. The gross margin of 23Q1-3's wear-resistant spare parts reached 41.6%, +3.9 pct year over year and 4.6 pct higher than 23H1. The increase in profitability was mainly due to the high overseas gross margin and rapid growth rate of the business. Rapid growth in the spare parts business supports the company's continued high growth.

Equipment+overseas business are making concerted efforts, and orders continue to achieve new breakthroughs. 23Q1-3's mineral processing equipment business revenue was 100 million yuan, +154.7% year-on-year; at the same time, the gross margin of 23Q1-3's overseas business was +10.5pct to 40.3% year-on-year. According to the company's performance forecast for the third quarter of '23, the total amount of contracts signed by the 23Q1-3 company reached 1.04 billion yuan, +101.8% year-on-year; of these, the 23Q3 contract amount was 330 million yuan, +72.9% year-on-year. The company has full orders and high growth in the equipment business, which indicates that the spare parts business will have sufficient growth momentum next year.

Profit forecasting and investment advice. We expect the company's net profit to be 1.11, 1.64, and 221 million yuan in 23-25 years. The company's overseas prosperity continued to improve, combined with the release of new products and new production capacity, and the overall performance experienced a period of rapid growth. Referring to comparable company valuations, we gave the company 23 years of 30xPE, with a corresponding reasonable value of 31.70 yuan/share, maintaining a “buy” rating.

Risk warning: risk of copper ore prices falling; Green Power's energy transformation falls short of expectations; overseas mining investment process falls short of expectations; penetration rate of rubber spare parts falls short of expectations; risk of fluctuations in raw material prices, etc.