The company announced third-quarter results: revenue of 0.419 billion yuan, +11.45% year over month, +8.13% month on month; net profit to mother 0.097 billion yuan, +11.94% year on month, +7.67% month on month; net profit without return to mother 0.093 billion yuan, +15.53% year on year, +10.88% month on month. In the first three quarters, the company achieved revenue of 1.143 billion yuan, +15.56% year over year; net profit to mother 0.271 billion yuan, +9.15% year over year; net profit after deducting non-return to mother 0.253 billion yuan, +13.60% year over year. Considering the overall layout of the company's products and continuous expansion of production capacity, the overall operation is expected to continue to improve and maintain the “buy” rating.

Due to the increase in the share of incremental business, gross margin was under pressure. The cost ratio was well controlled during the period due to the increase in the share of incremental business with low gross margin in the sealed sector, and gross margin was under pressure: in the first three quarters of 24, the company's gross profit margin was 47.61%, -2.61 pp. In terms of the cost ratio for the period, the sales expense ratio for the first three quarters was 8.75%, -0.63pp; the management expense ratio was 6.80%, -0.69pp; the financial expense ratio was -0.10%, +0.04pp; and the R&D expense ratio was 4.68%, -1.22pp. The cost rate for the total period reached 20.14%, -2.49pp year on year, and the overall cost rate was well controlled.

The “big seal” layout continues to improve, and production capacity expansion progresses smoothly

The company continues to enrich and improve the “big sealing” industry layout. Currently, it has three main product types: mechanical seals (including dry gas seals), rubber and plastic seals, and special valves. The company's comprehensive product layout effectively distributes the impact of market fluctuations in individual application fields on the company's business performance. In recent years, the company's orders have continued to be high, and plans to expand production have been gradually implemented. According to a report on the company's WeChat account on October 2, '24, the automated polyurethane seal production line of Zhongmi Holding Group was successfully put into operation at the Tianfu factory, and the first order of nearly 3,000 sets was delivered with quality and quantity. The company's production capacity expanded smoothly, enhancing the resilience of production and delivery.

The share repurchase process has been completed, demonstrating the company's confidence in long-term development

The company announced on April 25, '24 that it plans to use 0.05 billion yuan to 0.1 billion yuan of its own capital to repurchase some of the company's public shares through centralized bidding to implement employee stock ownership plans or equity incentives.

The company's management and important shareholders have no plans to reduce their share holdings within the next 6 months. This buyback plan shows the company's confidence in its continued development in the future. According to the company's third quarter report, the company's share repurchase process has been completed. A total of 1.9938 million shares were repurchased in this round, with a total transaction amount of 71.4334 million yuan.

Profit forecasting and valuation

Due to global macroeconomic disturbances, the overall sentiment of the industry is slightly under pressure compared to last year. We adjusted our forecast for 24-26 net profit of 0.395/0.457/0.555 billion yuan (previous value was 0.422/0.494/0.57 billion yuan), and the corresponding EPS was 1.90/2.19/2.66 yuan. Comparatively, the company's 25-year Wind unanimously expected an average PE value of 21 times. Considering that the company should enjoy a certain valuation premium with abundant orders and perfect product layout, the company was given 22 times PE in 25 years, corresponding to a target price of 48.18 yuan (previous value was 46.66 yuan).

Risk warning: The boom in the petrochemical and coal chemical industries exceeded expectations, fixed asset investment in the nuclear power and gas pipeline industry fell short of expectations, and the integration of acquisition companies fell short of expectations.