The company released the 2024Q3 performance report:

Q3: Revenue 2.99 billion yuan (YoY +4.09%), net profit to mother 0.175 billion yuan (YoY -17.18%); net profit not attributable to mother 0.163 billion yuan (YoY -18.95%);

Q1-Q3: Revenue 9.336 billion yuan (YoY +10.54%), net profit attributable to mother 0.649 billion yuan (YoY +20.10%); net profit not attributable to mother 0.629 billion yuan (YoY +0.81%).

Q3 profit was mainly affected by credit impairment losses. After deducting this effect, Q3 net profit attributable to mother +11% year-on-year

Revenue analysis: refrigeration decelerates, zero still contributes to the main elasticity

Refrigeration accessories: We expect a +21% slowdown from Q2 compared to the same period last year. The impact of high growth in Q2 and Q1 order delays compounded the slowdown in downstream demand in Q3. According to industry online data, 24Q2/Q3 air conditioning production was +12.5%/+6.8% year-on-year, respectively, and decelerated month-on-month in Q3;

Automotive thermal management: We expect to continue to contribute major resilience. On August 7, the company completed the acquisition of Shanghai Dachuang and included it in the scope of the merger, and the company's auto parts business was continuously consolidated;

Refrigeration equipment: We expect a low growth rate in Q3. According to industry online data, in 24Q2/July-August, multi-online domestic sales were -4.7%/-4.7%, respectively.

Profit Analysis: Improving Credit Impairment Losses Affects Profits

Q3 gross profit margin 18.6%, month-on-month -0.8/+0.2pct; Q3 net profit margin 5.8%, month-on-month -1.5/-1.3 pct, with sales/management/R&D/finance expense ratios of -0.49/-0.45/+0.93/+0.01pct year on year, and the total four fees were +0pct year over year;

The company's gross margin declined due to the increase in copper prices, etc. There was little change in investment, but the net interest rate declined even more. The main reason was that Zhejiang Dunan Energy Saving Technology Co., Ltd. sold the shares of a subsidiary under the energy saving business and preparation of 60 million yuan for bad debts issued by the subsidiary.

The net profit margin due to this deduction was 7.9%, or +0.5/+0.7pct month-on-month.

Investment advice:

Our point of view:

Looking ahead to Q4, the trade-in policy is expected to drive up demand for downstream air conditioners. We expect that the refrigeration parts business, the company's core business, is expected to recover, and the auto parts business will continue to contribute to the elasticity of the second growth curve.

Profit forecast: Based on the company's Q3 impairment calculation, we lowered the profit forecast. We expect the company's revenue in 2024-2026 to 12.532/13.782/15.06 billion yuan (previous value 12.532/13.782/15.06 billion yuan), +10.1%/+10.0%/+9.3% YoY, net profit to mother 0.904/1.175/1.362 billion yuan (previous value 1.047/1.174/1.367 billion yuan), +22.5%/+29.9%/+16.0%; corresponding PE13/10/9X, maintaining a “buy” rating.

Risk warning:

Industry sentiment fluctuates, business development falls short of expectations, and raw material costs fluctuate.