Qingda Environmental Protection released its report for the third quarter of 2024. The first three quarters of 2024 achieved operating income of 0.769 billion yuan, +50.11% year over year; realized net profit of 33.8152 million yuan, +64.05% year over year; net profit without return to mother 29.3105 million yuan, +81.31% year over year; basic earnings per share were 0.27 yuan/share. Q3 achieved revenue of 0.255 billion yuan in a single quarter, +59.58% year over year; net profit to mother 9.8329 million yuan, +27.40% year over year; net profit after deducting non-return to mother of 7.2021 million yuan, +7.33% year over year.

Increased orders drive continued growth in performance, and the “three-reform linkage” of coal and electricity expands market space. The company's traditional business includes slag removal equipment and low-temperature coal savers. It has significantly benefited from the new expansion of coal power and the energy saving and carbon reduction transformation of coal power, and the main business continues to grow rapidly. The third quarter achieved a 59.58% year-on-year increase in revenue and 27.4% year-on-year net profit; in the first three quarters, overall revenue increased by 50.11%, and net profit to mother increased 64.05% year-on-year, mainly driven by a year-on-year increase in orders and steady growth in sales products, with significant performance improvements. The total amount of basic investment in thermal power in the first three quarters of 2024 was 87 billion yuan, +27.3% over the same period last year. In May 2024, the State Council issued the “2024-2025 Energy Conservation and Carbon Reduction Action Plan” to strengthen the clean and efficient use of coal, promote low-carbon transformation and construction of coal power, and promote the “three-reform linkage” of energy saving and carbon reduction transformation, flexibility transformation, and heating transformation. It is expected that the market demand for essential auxiliary equipment for coal power will increase dramatically. Currently, the company's newly purchased factory area is undergoing production line adjustments and upgrades, and is expected to continue to grow in order to expand production capacity.

The company attaches importance to R&D investment and waits for emerging businesses to drive growth. In the third quarter of 2024, the company invested 0.013 billion yuan in R&D in a single quarter, an increase of 22.83% over the previous year. The company's management expenses in the third quarter increased 87.64% year on year, and financial expenses increased 68.95% year on year. Considering the increase in the company's orders and revenue growth in a single quarter, the increase in the company's expenses was relatively reasonable. In 2023, the company implemented the first order in the steel slag business, successfully opened up the steel slag treatment market, and laid out energy-saving transformation in the non-electric industry. In addition, the company used financial leasing to invest in the construction of a 120MW fishery and light complementary project, which is expected to be completed and connected to the grid at full capacity by December 15, 2024. The company plans to actively promote the company's technology research and development and manufacturing in the field of hydrogen energy equipment through investment and construction of this project. Emerging businesses are expected to open up new space for the company's business growth.

Investment advice. The company's auxiliary equipment performance has maintained a relatively rapid growth rate. As the leading segment of coal power auxiliary equipment, it directly benefits from the construction of coal power generation and energy-saving and carbon-reduction transformation, and the continuous release of market demand supports the continuous improvement of the company's profitability. We predict that the company's net profit for 2024-2026 will be 0.134/0.164/0.209 billion yuan, corresponding EPS will be 1.09/1.33/1.70 yuan/share, respectively, and PE will be 13.9/11.3/8.9 times, respectively, maintaining the “buy” rating.

Risk warning: the installation speed falls short of expectations; the promotion of industry policies such as thermal power flexibility transformation and green power trading falls short of expectations; prices of upstream raw materials have risen.