Key points of investment

Incident: Dun An Environmental released its report for the first three quarters of 2024. (1) 24Q1-24Q3: Operating income was 9.336 billion yuan, up 10.54% year on year; net profit to mother was 0.649 billion yuan, up 20.10% year on year; net profit after deducting non-return to mother was 0.629 billion yuan, up 0.81% year on year; EPS was 0.61 yuan/share, up 19.61% year on year. (2) 24Q3: Operating income was 2.99 billion yuan, up 4.09% year on year; net profit to mother was 0.175 billion yuan, down 17.18% year on year; net profit after deducting non-return to mother was 0.163 billion yuan, down 18.95% year on year; EPS was 0.17 yuan/share, down 15% year on year.

Revenue side: The improvement in the downstream air conditioning industry and the NEV market is driving revenue growth.

According to industry online data, the sales volume of household air conditioners in China from January to June 2024 was 113.472 million units, up 15.50% year on year, and the improving environment in the downstream air conditioning industry led to the growth of the company's refrigeration parts business. In terms of automotive thermal management, domestic NEV production and sales from January to June 2024 were 4.929 million vehicles and 4.944 million units, respectively, up 30.10% and 32.00% year-on-year, respectively, which will drive market demand for NEV thermal management products Continued significant growth.

Cost and expense side: stable business pattern and optimized cost rate.

(1) 24Q1-24Q3's gross margin was 18.19%, down 1.08pcts; 24Q3 gross margin was 18.57%, or 0.84pcts. (2) 24Q1-24Q3's four major expense ratios were 9.44%, down 0.67pcts. The sales/management/finance/R&D expense ratios were 2.67%/2.92%/0.08%/3.78%, respectively, with year-on-year changes of -0.42/-0.15/-0.25/0.14pcts. Among them, 24Q1-Q3 financial expenses decreased by 74.57% year-on-year, mainly due to structural and interest rate optimization and increased interest income.

Marginal side: Vigorously expand the thermal management business for new energy vehicles, and look forward to future development space.

The company acquired Shanghai Dachuang Automobile Technology Co., Ltd. to make up for the shortcomings of waterside products and the refrigerant side+water side to boost ASP growth. Second, the supply of opportunities will catalyze a rapid increase in the company's revenue. Currently, the company is leading the market in terms of technology and product performance, and has entered the supply system of OEMs such as BYD, Geely, and Ideal. With the company's acquisition of Shanghai Dachuang Automobile Technology Co., Ltd., the product range has been enriched, and the company's thermal management business is expected to continue to grow rapidly in the future.

Profit forecasting and valuation

We expect the company's 2024-2026 revenue to be 12.78, 14.38, and 16.14 billion yuan, respectively, with year-on-year growth rates of 12.29%, 12.48%, 12.27%, and 3-year CAGR of 12.4%; net profit to mother of 0.98, 1.08, and 1.27 billion yuan, respectively, with year-on-year growth rates of 32.35%, 10.70%, 17.65%, and 3-year CAGR of 19.9%. Corresponding PE is 12, 11, and 9 times, respectively. ” Ratings.

Risk warning: New energy sales fall short of expectations, waterside products drive ASP growth less than expected, etc.