Keyuan Smart achieved revenue of 1.162 billion yuan in the first three quarters of 2024, an increase of 16.16%, net profit to mother of 0.159 billion yuan, an increase of 75.34%. After deducting non-return net profit of 0.145 billion yuan, an increase of 88.71%.

2024Q3's revenue was 0.357 billion yuan, up 15.99%, and net profit to mother was 0.048 billion yuan, up 2.84% from the same period.

The localization of industrial control in energy enterprises was promoted according to the plan, and the company won bids for a number of key projects during the reporting period. Industrial control software is related to the safety of the energy industry, and the localization replacement plan is clear. Keyuan Wisdom insists on independent innovation, has created hundreds of sets of benchmark models, and won the national manufacturing individual championship in 2024. In the third quarter of 2024, Keyuan Smart successively won bids for 10 units in Datang Group's Beijing-Tianjin-Hebei bundled tender, and dozens of large-scale thermal power generator control system projects, including Zhejiang Energy Group's 6 1000MW construction units DCS, Guangdong Energy Group, Guizhou Energy Group, Jiangsu Guoxin Group, Anhui Wanneng Group, and the Three Gorges Group. In September 2024, Keyuan Smart will cooperate strategically with China Energy Construction China Power Engineering Northwest Institute to develop in-depth cooperation on product development and marketing in areas such as the EmpoworX industrial Internet platform, intelligent control system ICS, smart control ISS, and smart coal farms. The two sides have successfully connected the world's largest molten salt “Linear Fresnel” 0.1 million kilowatt photothermal energy storage project to generate electricity. It is the first “photothermal energy storage+photovoltaic+wind power” project in China.

In terms of intelligence, in October 2024, Keyuan Smart won the bid for Suneng (Xilingol) Power Generation Co., Ltd.'s Ulagai 2×1000MW high-efficiency ultra-supercritical coal-fired generator project smart power plant system. Based on the intelligent power generation system (ICS) and intelligent management system (IMS) platforms, it comprehensively collects real-time production information scattered by DCS, SIS, and MIS to achieve safety sensing and control throughout the plant. Keyuan Smart AI machine vision solutions have been implemented in the metallurgical industry, providing intelligent technologies such as online identification of AI operating conditions, self-optimization of control strategies, autonomous optimization of multiple conditions, equipment defect identification, equipment operation state prediction, and equipment health knowledge management. It has been applied to many projects such as Shagang, Jiugang, Baogang, Nippon Steel, and Fushun New Steel.

Due to the weather in the third quarter, delivery of some projects was delayed, and profitability continued to increase. Due to continued high temperatures in some regions of the country in the third quarter, the delivery schedule of autonomous and controlled alternatives to the company's downstream energy and power industry was affected to a certain extent, and it is expected that it will gradually recover in the fourth quarter. The increase in the company's profitability is due to an increase in the share of high-margin automation businesses and a decrease in the cost ratio. In the first three quarters of 2024, the company's overall gross margin increased further to 40.82% from 39.21% for the full year of 2023. The gross profit margin for the third quarter of the single quarter was 42.39%, up 2.66 pcts from the same period, and 0.79 pcts. Meanwhile, sales and management expenses rates for the first three quarters of 2024 were 11.63% (down 2.11pct) and 5.27% (down 0.77pct), respectively. The net interest rate for the first three quarters of 2024 was 14.10%, up 5.26pct from the same period.

Profit forecast and investment suggestions: The company's industrial automation clearly benefits from the promotion of localization and substitution. Ongoing orders are sufficient. Implementation is expected to accelerate in the fourth quarter, and the advantages of industrial Internet platforms are gradually accumulating, combined with AI technology to help the intelligent upgrading of the industry. From 2024 to 2026, the company's total revenue is expected to be 1.879/2.442/3.129 billion yuan, corresponding growth rate of 33.51%/30.00%/28.12%; net profit to mother is 0.236/0.352/0.464 billion yuan, up 46.67%/49.31%/31.84% year-on-year. The corresponding EPS is 0.98/1.47/1.93 yuan. Comparable companies, China Control Technology, Baoxin Software, and Dongfang Electronics forecast an average PE of 25.03/20.24/16.46 times for 2024-2026. The current price of Keyuan Smart corresponds to 2024-2026 PE at 20.11/13.47/10.22 times, maintaining the “recommended” rating.

Risk warning: risk of macroeconomic fluctuations, risk of loss of core talent, risk of market competition and technology development, risk of localization policies falling short of expectations.