Core views

In the third quarter of 2024, under pressure on real estate completion data, restructuring of the elevator parts business, and a relatively high year-on-year base, the company's operating income was phased under pressure, but net profit after deduction maintained steady growth, supported by stable gross margin of the company's business and strict control of repayments. Looking ahead, at present, the company's orders are still bucking the trend in the face of the industry's downturn, and performance is expected to maintain a steady trend. At the same time, the company attaches great importance to shareholder returns and gives back to shareholders through various means. Currently, the dividend rate is high, and it is at a leading level in the industry.

occurrences

The company released its 2024 three-quarter report. In the first three quarters, the company achieved operating income of 49.4.4 billion yuan, a year-on-year decrease of 7.82%, achieved net profit of 0.545 billion yuan, an increase of 8.96% over the previous year, and realized net profit after deducting 0.547 billion yuan, an increase of 9.65% over the previous year; in the third quarter, the company achieved operating income of 1.729 billion yuan, a year-on-year decrease of 16.66%, and achieved net profit to mother of 0.311 billion yuan, a year-on-year increase of 52.07 billion yuan %, achieving net profit of 0.238 billion yuan after deduction, an increase of 13.22% over the previous year.

Brief review

Revenue was under phased pressure, and net profit after deduction grew steadily

On the revenue side, the company's revenue decline increased slightly in the third quarter, up 10.67 pct from the second quarter of a month, mainly due to the following reasons: ① The third quarter of 2023 benefited from the building insurance policy, and overall elevator production increased, which in turn made the year-on-year base for the third quarter of 2024 relatively high; ② the year-on-year growth rate of real estate completed area in the third quarter of 2024 was weak, which in turn put some pressure on the elevator machine business; ③ For elevator parts, the company actively adjusted its business structure and reduced the share of some low-profit components.

Looking at the follow-up, the company uses the 15 elevator companies that currently have the highest market share as observation companies and regularly tracks the order situation. According to the company's order data, orders for the industry as a whole are expected to drop by about 8% year-on-year in the first three quarters of this year, while the company's order situation is better than the industry average and has increased slightly. Under the gradual delivery of subsequent orders, the company's revenue growth rate is expected to pick up.

From the profit side, the company's net profit to mother grew rapidly in the third quarter, mainly due to the company's investment in new construction shares (stocks), which in turn led to a year-on-year increase in overall fair value change earnings; judging from net profit after deducting net profit from back to mother, the company maintained steady growth. The year-on-year growth rate in the single quarter increased year-on-year compared to the second quarter, mainly due to: ① The company reduced credit impairment losses by strengthening repayments; ② The gross margin remained relatively stable, and the complete machine business maintained a good profit level, and the parts business is expected to improve to a certain extent.

The 2024 semi-annual equity distribution ends, and we have placed great emphasis on shareholder returns for a long time

On August 28, the company announced a mid-term profit distribution plan, with a cash dividend of 0.75 yuan (tax included) per share, with a total cash dividend of 6.5 0.5 billion yuan (tax included), exceeding market expectations; on October 21, the semi-annual equity distribution ended, and the final number of shares actually participating in profit distribution was 0.868 billion shares, with a total cash dividend of 0.651 billion yuan (tax included). Looking ahead to the whole year, the company will continue to implement the “Improve Quality, Increase Efficiency, and Value Return” action plan to give back to shareholders through various methods. Currently, the dividend rate is high, and it is at the leading level in the industry.

In 2024, it is planned to support the renewal of more than 0.04 million old elevators, and the stock market is expected to be active

On September 24, the National Development and Reform Commission held a special press conference. Up to now, key tasks such as upgrading old residential elevators, sewage treatment, sanitation facilities and equipment, and upgrading supporting equipment for the Lifeline Project have received financial support from ultra-long-term treasury bonds. Among them, looking at the elevator industry, the Development and Reform Commission proposed a 2024 plan: the 2024 plan uses ultra-long-term special treasury bond funds to support various regions to upgrade more than 0.04 million old residential elevators that have been in use for more than 15 years. We believe that according to data from the Elevator Industry Association in 2023, the annual elevator production will be 1.13 million units, and the 2024 equipment renewal policy will drive the renewal of more than 0.04 million old elevators, accounting for about 4% of elevator production in 2023. If the elevator renewal policy continues to advance, it is expected that the number of elevator updates will rise again in 2025, and stock demand is expected to be actively released.

Investment suggestions: From 2024 to 2026, the company is expected to achieve operating income of 8.056 billion yuan, 8.381 billion yuan, and 8.695 billion yuan, respectively, up 9.09%, 4.03%, and 3.75% year on year; net profit to mother is expected to achieve 0.828 billion yuan, 0.898 billion yuan, and 0.949 billion yuan, respectively, up 8.66%, 8.56%, and 5.63% year on year, respectively. The corresponding PE is 13.52x, 12.45x, 11.79x, maintaining a “buy” rating.

Risk analysis

1. The development of the elevator industry in which the company is located is closely related to macroeconomic policies, the environment and the prosperity of the downstream real estate industry. Increased risk of uncertainty in the external economy may have an impact on the recovery process of the Chinese economy, thereby affecting normal market demand and having a certain impact on the company's business development.

2. The main raw materials for the company's elevator and escalator products are steel. Steel prices are affected by various factors such as domestic macroeconomic policies, market supply and demand relationships, and the international steel market environment, and domestic steel prices fluctuate greatly. Fluctuations in the price of raw materials will have a certain impact on the company's performance.

3. Affected by macroeconomics and real estate regulation, etc., the financial aspects of the company's downstream customers have had a big impact, and the repayment cycle has been extended, leading to a gradual increase in the company's accounts receivable. For example, sales repayments and financing channels from major customers cannot be effectively improved, and the spread of credit risk will cause the company's accounts receivable not to be recovered on schedule, and there is a certain risk of bad debts.