Incident: On April 26, the company released its 2024 quarterly report, achieving operating income of 144.77 million yuan, a year-on-year decrease of 91.61%; net profit attributable to mother - 1,148,700 yuan, year-on-year profit and loss; net profit not attributable to mother - 2.234 million yuan, year-on-year profit and loss.

Short-term performance is under pressure, focusing on high-end filter board application space: Affected by financial constraints from downstream customers, the construction and bidding process for the company's key regional projects was slow, and new orders and ongoing orders in 2023 fell short of expectations. At the same time, some projects were affected by implementation and inspection progress and did not generate revenue, which in turn led to a decline in results for the first quarter of 2024. As the economic recovery trend improved, local financial pressure eased, and the company's project repayments gradually improved. In the first quarter of 2024, the company prepared bad debts in response to accounts collected and generated a current profit of 16.23 million yuan. The company actively expands the application fields of high-end filter panels and provides products and services to customers in emerging solid-liquid separation application industries such as chemicals, lithium batteries, and sugar production. In the first quarter of 2024, the company signed a new project contract amount of 98.8703 million yuan, which is expected to provide support for subsequent performance restoration.

The layout in the field of energy saving and low carbon is yet to be released: The high water source heat pump technology and equipment innovatively developed by the company has been applied in projects such as Daguan Water Purification Plant and Hongqiao Sewage Treatment Plant, and has effective energy saving and carbon reduction, and has good environmental and economic benefits. In December '23, the company established a hydrogen energy division. It plans to deeply couple safe hydrogen storage technology with the company's technologies such as sludge treatment, exhaust gas purification, and high-temperature water source heat pumps to form comprehensive utilization and overall solutions, which is expected to create more comprehensive benefits for enterprises and society.

Investment suggestions: Affected by new orders in 2023 falling short of expectations, short-term performance is under pressure; industrial application scenarios continue to be developed, and high-end filter panels have broad application space; layout fields such as high-temperature water source heat pumps, dual-carbon integrated services, and hydrogen storage and transportation to promote energy-saving and low-carbon transformation. Based on the company's operating conditions and maintaining the company's profit forecast, EPS for 24/25/26 was 0.48/0.59/0.69 yuan/share, respectively, corresponding to the closing price PE on April 26, 2024, which is 23/19/16 times, respectively. Considering that the company's core equipment is still in its early stages of application in the industrial field, it has growth potential, maintaining 24.0 times PE in 2024, with a target price of 11.52 yuan/share, maintaining a “careful recommendation” rating.

Risk warning: industry policy risks; fluctuating raw material prices; increased industry competition.