2024Q1-Q3 performance: Revenue of 2.857 billion yuan, -1.71% YoY, net profit to mother of 0.721 billion yuan, +6.11% YoY, deducted non-net profit of 0.689 billion yuan, +6.35% YoY. Gross profit margin 40.74%, +0.67pct year on year, net profit margin 25.32%, +1.88pct year on year.

2024Q3 performance: Revenue of 1.022 billion yuan, -10.16% YoY, net profit to mother 0.271 billion yuan, -13.89% YoY, -11.07% month-on-month, deducted non-net profit of 0.264 billion yuan, -10.84% YoY. Gross profit margin 41.27%, -1.46pct yoy, -1.51 pct month-on-month; net profit margin 26.56%, -1.15pct yoy, -1.55pct month-on-month.

On the revenue side, compressors are growing steadily, demand for photovoltaic vacuum pumps is under pressure, and maintenance is growing at a high rate. By product, in the third quarter, the company's compressor business continued the steady growth trend of the first half of the year. Mainly, ① demand for engine head products had a certain degree of rigidity, and ② heat pumps replaced coal-fired boilers in the industrial sector, and demand for heat pumps grew rapidly. Capital expenditure in the photovoltaic industry declined, and demand for vacuum pumps declined a lot. In the semiconductor industry, vacuum pump competition intensified due to low customer capacity utilization, foreign brand price cuts, and vacuum pump competition intensified, so the company's vacuum pump business declined in the third quarter.

The maintenance market has maintained a high growth rate, mainly because customers have some technical improvement projects and the stock vacuum pumps sold by the company are gradually entering the routine maintenance period.

Q3 gross margin declined slightly year over year, which is a normal fluctuation. The company's Q3 gross margin was 1.46pcts year-on-year, mainly due to changes in product structure and fluctuations in the gross margin of a single business, that is, the gross margin of vacuum pumps and other businesses declined slightly, but the overall change was not significant, which is a normal fluctuation.

The decline in Q3 net margin was slightly less than gross profit margin. The company's Q3 management expense ratio was 3.49%, +0.5pct year on year, sales expenses ratio 4.55%, +0.09pct year on year, R&D expenses rate 3.72%, -1.18pct year on year, financial expenses ratio -0.87%, and +2.16pct year over year. The increase in the financial expense ratio was mainly due to a decline in exchange earnings, which achieved exchange earnings of about 6 million in 24Q3 and 36 million in 23Q3. At the same time, the company's asset disposal revenue increased, and the net interest rate declined slightly less than the gross profit margin due to the combined impact. Looking at the first three quarters, the company's sales expense ratio and management expense ratio were basically the same year on year, and the R&D expense ratio and financial expense ratio declined, so the overall net interest rate increased by 1.88pct.

Lower profit forecasts and maintain the “Highly Recommended” investment rating. Due to pressure on vacuum pump demand and no signs of recovery have been observed, we lowered our profit forecast for 2024-2026 to: revenue of 3.715/3.84/4.028 billion yuan, -4%/+3%/+5% YoY; net profit to mother of 0.884/0.905/0.948 billion yuan, +2%/+5% YoY, corresponding PE to 11.5/11.3/10.8x. We believe that the company's long-term development path is clear, there is still plenty of room for growth, and maintains a “Highly Recommended” rating.

Risk warning: fluctuating industry demand, relative concentration of customers, market competition risk, business management risk.