On October 30, the company released its three-quarter report. 24Q1-Q3 achieved revenue of 36.62 billion yuan, +12.84% year over year; net profit to mother of 0.743 billion yuan, +80.49% year over year.

Among them, single Q3 achieved revenue of 11.759 billion yuan, +5.57% year-on-year; realized net profit of 0.268 billion yuan, or +114.40% year-on-year.

There was a high increase in performance in the first three quarters, and gross margin increased steadily. According to the company's announcement, thanks to the increase in delivery orders from diesel engine subsidiaries, the increase in the price of low-speed diesel engines, and the expansion of the company's marine machinery sales scale, the company 24Q1-Q3 achieved net profit of 0.743 billion yuan, +80.49% over the same period last year, and a high increase in performance. Over the past 24 years, the company's gross margin has risen quarterly. 3Q24 was 14.87%, up 4.22 and 2.03pcts respectively from Q1 and Q2.

It plans to acquire 16.51% of CSSC Diesel Engine's shares, and is optimistic that the company's profit flexibility will increase. According to the company's announcement, the company plans to acquire 16.51% of the shares of CSIC Diesel by issuing convertible bonds and paying cash, and to raise supporting capital through the issuance of convertible bonds.

Prior to this announcement, the company held 51.85% of CSIC Diesel Engine, and the shareholding ratio is expected to increase to 68.36% after the acquisition, which will further strengthen the company's deep integration of the diesel engine business and promote efficient decision-making and high-quality development of the diesel engine business. The profitability of the company's diesel power business is relatively high, with a gross profit margin of 14.71% for 1H24, 2.87 pcts higher than the overall gross margin of 1H24. In the context of the current shipbuilding cycle continuing to rise, the price of marine diesel engines has increased, and the holding ratio of high-margin businesses has increased, and we are optimistic that the company's profit flexibility will increase in the future.

Dual fuel engine technology is improving rapidly, and I am optimistic that the company's ability to take orders will improve in the future. According to the official website of the company's subsidiary CSSC Engine, on September 30, the large bore LNG dual-fuel marine low-speed engine built by CSIC Engine was successfully delivered, marking that the company has manufacturing and testing capabilities for large-bore LNG dual-fuel marine low-speed engines, and that the company has achieved a new breakthrough in the field of green marine engine construction. The number of LNG dual-fuel marine low-speed engines delivered to the 1-3Q24 CSIC engine increased by 30% and 37.2%, respectively, over the same period last year. In addition, CSIC engines are expected to have large bore ammonia fuel mainframe testing capabilities in 2025, as well as production test capabilities for large-bore dual-fuel marine low-speed engines with an annual output of 30 units and 1.5 million horsepower, further improving the ability to take orders for diesel engines.

Profit Forecasts, Valuations, and Ratings

In 2024-2026, we expect the company's revenue to be 52.6/61.1/70.9 billion yuan, net profit to mother of 1.15/1.938/2.977 billion yuan, corresponding PE of 45/27/18X, maintaining the “gain” rating.

Risk warning

Raw material price fluctuations, RMB exchange rate fluctuations, growth of new orders falling short of expectations, and lower implementation of carbon emission reduction policies than expected risks