Incident: The company released its three-quarter report. 24Q1-Q3 achieved revenue of 0.921 billion yuan, yoy +41.71%, net profit to mother 0.12 billion, yoy +48.78%, net profit after deducting non-return to mother 0.117 billion, yoy +70.90%, gross sales margin 37.36%, yoy+2.61 pct, net sales margin 13.29%, yoy+0.61 pct. Among them, 24Q3 achieved revenue of 0.294 billion, yoy +17.77%, net profit of 0.036 billion yuan, yoy +30.74%, net profit of non-return to mother 0.034 billion, yoy +65.25%, gross sales margin of about 42.40%, +3.88pct year on year, and net sales profit margin of 12.92%, year-on-year +1.77pct.

Mining rubber wear-resistant spare parts revenue grew rapidly, and profitability further improved. By product, Q1-Q3 mining rubber wear-resistant spare parts achieved revenue of 0.51 billion yuan, +34.88%; beneficiation system solutions and services achieved revenue of 0.2 billion yuan, +527.15%; beneficiation equipment achieved revenue of 0.094 billion yuan, -7.84%; mining metal spare parts achieved revenue of 0.091 billion yuan, -8.21%; and mining pipelines achieved revenue of 0.022 billion yuan, or -40.23% YoY. The company's core product, rubber composite spare parts, has benefited from increased penetration rate, continuous development of overseas customers, rapid growth in revenue scale, and a steady increase in manufacturing revenue. 24Q1-Q3's rubber spare parts revenue accounted for more than 70.84% of the company's manufacturing revenue, +4.34pct compared to 2008. In addition, the profitability of rubber composite spare parts was further improved, and the gross margin of 24Q1-Q3 reached 43.98%, +2.43pct year-on-year.

Expenses are well controlled, and the impact on exchange is significant. In 2024, Q1-Q3, the company's sales expenses ratio was 5.62% (yoy-0.38pct), the management expense ratio was 10.94% (yoy-2.82pct), the R&D expenses rate was 2.74% (yoy-0.62pct), and the financial expenses ratio was 1.16% (yoy +2.59pct). The increase in the company's financial expense ratio was mainly due to exchange rate fluctuations. Exchange losses in the third quarter of a single quarter reached 9.4697 million yuan. In addition, the company's expenses are well controlled. The 24Q1-Q3 three rate is about 19.30%, YOY -3.82pct.

New products and overseas layouts will usher in a harvest period. The company continues to promote the development and application of high-performance rubber wear-resistant materials and rubber composites. The ceramic slurry pump developed last year achieved a 1-2 times increase in the life span of spare parts during trials with some customers, and full promotion at home and abroad has already begun this year; the newly developed composite liners produced using forging technology have also been fully tested on beneficiation mill mills, and are expected to have the latest usage results by the end of the year. Furthermore, the company's layout and manufacturing are globalized. Currently, factories in Mongolia and Zambia have been put into operation, factories in Chile are under construction, and bases in Serbia and Peru are also being planned. The future will benefit from this, and overseas customer development is expected to accelerate. Take the Zambia plant as an example. The plant was put into operation in October '24. The company is the largest manufacturer of mineral processing spare parts in the surrounding area. After the factory is completed and put into operation, it can respond to customer needs in a timely manner, and also provide customers with maintenance and storage services, which greatly promotes the company's development of local customers.

Investment advice: We expect the company's net profit to be 0.15, 0.21, and 0.29 billion yuan respectively in 2024-2026, corresponding to the closing price of October 24, PE 30, 22, and 16 times, maintaining the “recommended” rating.

Risk warning: 1) The increase in the penetration rate of rubber composite spare parts falls short of expectations; 2) Mine prosperity falls short of expectations; 3) New product development progress falls short of expectations; 4) Overseas business progress falls short of expectations.