Pilot Intelligence released three quarterly reports: Q3 achieved revenue of 3.359 billion yuan (yoy -44.93%, qoq +37.61%) and net profit of 0.149 billion yuan (yoy -86.71%, qoq +241.78%).

Q1-Q3 2024 achieved revenue of 9.112 billion yuan (yoy -30.90%), net profit of 0.608 billion yuan (yoy -73.81%), deducted non-net profit of 0.588 billion yuan (yoy -74.22%). The company's overall line capacity is competitive globally, and the share of overseas revenue is expected to expand further in the future, maintaining a “buy” rating.

The gross margin for the 24Q3 single quarter improved slightly year-on-month, and the revenue pressure increased the company's gross profit margin by 36.42% for the first three quarters of 24, -1.61 pct year on year; 24Q3 gross profit margin for the single quarter was 36.63%, +1.01 pct year on year, and +0.97 pct month on month, a slight improvement over the previous month. The 24Q3 single-quarter expense ratio was 25.63%, +14.19pct year on year, mainly due to the decline in revenue scale in the current quarter; of these, the sales expense ratio was 2.43%, +0.65pct; the management expense ratio was 8.58%, +4.61 pct; the R&D expense ratio was 12.98%, +6.16pct year on year, and the financial expenses ratio was 1.64%, and the year-on-year +2.77pct.

Impairment dragged down 24Q3 performance, and asset impairment losses narrowed slightly

Due to the slowdown in downstream demand and the low utilization rate of customer production capacity, the repayment cycle was lengthened, and the company's impairment calculation dragged down 24Q3 performance. The company's asset impairment provisions for the first three quarters of 2024 totaled 0.6 billion yuan, including a credit impairment loss of 0.532 billion yuan, an increase over the previous loss of 0.323 billion yuan; asset impairment losses were 68.1065 million yuan, which was narrower than the previous loss of 99.8941 million yuan.

Continuing to expand overseas business, it is worth looking forward to lithium battery equipment going overseas

Looking at the medium to long term, there is still plenty of room for growth in the overseas lithium battery equipment market. Not only are companies led by Japan and South Korea increasing their production capacity in Europe and the US, but overseas automakers are also actively investing in self-built battery production capacity, and China's leading lithium battery equipment companies are expected to benefit. In August '24, it pioneered smart lamination equipment orders and welcomed new breakthroughs overseas. It successfully obtained new European base equipment orders from the world's top car companies, and became a global equipment and system service supplier for customers.

Profit forecasting and valuation

Due to the continuing drag of 24Q3 impairment accrual and the slowdown in downstream demand, we lowered our 24-year revenue growth rate and increased our impairment accrual forecast. The company's net profit for 2024-2026 is 2.197 billion yuan, 2.864, and 3.635 billion yuan (previous values 2.868, 3.454, 4.374 billion yuan), and the corresponding EPS is 1.40, 1.83, 2.32 yuan (previous value 1.83, 2.21, 2.79 yuan). Comparatively, the company's 25-year wind unanimously expected an average PE value of 13 times. Considering that the company has an advantage in the overall line business, there should be a premium. The company will be given 14 times PE in 25 years, with a target price of 25.62 yuan (previous value of 18.30 yuan).

Risk warning: International macroeconomic and international trade policy risks; risk of exchange rate fluctuations; increased risk of industry competition; risk of customer expansion or overseas demand falling short of expectations; risk of slowing equipment acceptance.