Brief performance review

On October 24, 2024, the company released its quarterly report for the year 24. 24Q1-Q3 achieved revenue of 8.047 billion yuan, or -8.10%, of which a single Q3 revenue was 3.09 billion yuan, or -7.38% year-on-year. 24Q1-Q3 achieved net profit of 1.598 billion yuan, +2.21% year over year; net profit without deduction of 1.397 billion yuan, -8.66% year over year; of these, single Q3 achieved net profit of 0.51 billion yuan, or -2.04% year over year, and single Q3 achieved net profit without deduction of 0.477 billion yuan, or -6.74% year on year.

Management analysis

The high base has put pressure on revenue in the short term, and orders have maintained high growth. 24Q1-Q3 achieved revenue of 8.047 billion yuan, -8.10% year-on-year, mainly due to the company's large EPC order execution during the same period in '23. According to the company announcement, 24H1 signed a new order of 7.18 billion yuan, +18.9% year over year, and 24Q3 company's contract debt reached 1.5 billion yuan, +67.9% year over year. Downstream demand remains high. It is expected that with the gradual execution of the order, revenue will recover steadily.

Overseas layout results have been shown, and gross margin has improved markedly. 24H1's overseas revenue accounted for 48.0%, and gross margin was 37.2%, up from 34.6% in China during the same period. Driven by high-margin overseas business, 24Q1-Q3's gross margin increased 1.5 pct year over year. The company's overseas orders continued to land in the third quarter. North America: The company's electric fracturing equipment had a maximum water horsepower of 8,000 HHP, which was superior to leading overseas companies. In July '24, the company also received orders for electric fracturing equipment from old North American customers, which accelerated progress in North America; Middle East: In September '24, the company received an EPC order for 2.2 billion yuan natural gas from Bahrain. It is expected that as the overseas layout continues to be implemented, it is expected to continue to drive an increase in the company's overall profitability.

Cash flow picked up significantly. Since this year, the company has paid attention to cash flow management, increased collection efforts, increased the proportion of localized suppliers, and increased bill settlement methods. The net cash flow from 24Q1-Q3's operating activities was 1.468 billion yuan, +288.4% over the same period last year.

The core management collectively increased their holdings, demonstrating confidence in the company's long-term development. On September 18, the company announced that Mr. Li Huitao, Chairman of the Company, Mr. Li Zhiyong, President, and Mr. Lu Wei, Vice President, plan to use self-raised funds to increase their holdings of the company's shares through centralized bidding within 6 months from September 19, 2024. The total amount of increase in holdings will not be less than 7 million yuan and no more than 9 million yuan. We believe that this increase in holdings shows the company's management's confidence in the company's long-term development.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue for 24-26 to be 14.286/16.916/19.164 billion yuan, net profit to mother of 2.703/3.208/3.731 billion yuan, corresponding PE of 12/10/9 times. Maintain a “buy” rating.

Risk warning

Risk of large fluctuations in crude oil and natural gas prices; risk of rising raw material prices; risk of exchange rate fluctuations.