The company announced 24Q3 results, and achieved revenue of 3.436 billion yuan (yoy +23.21%, qoq -13.50%); net profit to mother of 0.666 billion yuan (yoy +7.43%, qoq -15.28%); net profit of 0.67 billion yuan (yoy +30.03%, qoq -4.66%). The company's dual main business and dual markets are progressing smoothly, and quarterly gross margin continues to increase month-on-month. We are optimistic about the subsequent development of the company's two main businesses and maintain a “buy” rating.

Deductions are growing rapidly, and gross margin continues to rise month-on-month

The company 24Q1-3 achieved revenue of 10.434 billion yuan (yoy +25.14%), net profit to mother of 1.816 billion yuan (yoy +21.91%), deducted non-net profit of 1.748 billion yuan (yoy +31.32%), and ROE reached 15.99% (yoy+1.18pct). The company's 24Q1-3 overall gross profit margin was 36.21%, +2.59pct year on year, 17.47% net profit margin, -0.51 pct year on year, mainly due to an increase in financial and sales expenses. The gross margin for the Q1-Q3 single quarter was 31.20%/37.21%/39.48%, respectively. It was mainly due to the increase in the share of rehabilitation services in the medical sector through continuous technological innovation and internal cost reduction and efficiency for 3 consecutive quarters. The overall 24Q1-3 sales/management/finance/R&D expense ratios were 17.8%/6.8%/6.3% /0.7%/4.0%, respectively, compared with +1.9/0.7/0.1/1.0/0.1 pct. The main reason was an increase in sales and financial expenses due to market development and a decrease in exchange earnings.

The two main businesses jointly drive increased profitability, and there are plenty of on-hand orders

By business, the 24Q1-Q3 smart power distribution revenue was +26.54% year-on-year, mainly due to the domestic grid winning bid amount. Off-grid customers continued to develop, the share of overseas base production capacity increased to about 50%, and the overseas electricity business increased its efforts to promote system solution projects. After breaking through the Middle East market for the first time in 2023, the overseas power distribution business obtained its first order in Europe and America this year. Revenue from medical services was +21.73% year-on-year, and the number of rehabilitation hospitals and single-store operations increased simultaneously. By the end of 24Q3, the company had accumulated orders of 15.62 billion yuan, +35.18% compared with the same period last year. The cumulative number of domestic orders in hand was 9.374 billion yuan, +35.10%; the cumulative number of overseas orders in hand was 6.246 billion yuan, +35.30% over the same period. Among them, overseas distribution orders were 0.962 billion yuan, an increase of +272.51% year on year, and business progress was remarkable.

Profit forecasting and valuation

We maintain the 24-26 net profit forecast of 2.337/2.921/3.638 billion yuan, with year-on-year growth rates of 22.76%/25.00%/24.55%, respectively. We expect net profit for smart electricity distribution and other/medical services to be 2.42/0.5 billion yuan in 2025, respectively. As of October 24, Comparable's 25-year Wind agreed that the average PE was 17/28X, respectively. Considering that the company is leading in multiple market segments in the field of intelligent power distribution, we have given the two businesses a 25-year 20/28X PE with a target price of 44.25 yuan, maintaining a “buy” rating.

Risk warning: Investment in power grids falls short of expected risk, overseas smart meter penetration rate falls short of expected risk, industry competition increases risk, raw material price increases risk, medical business falls short of expected risk.