3Q24 results are in line with market expectations

The company announced 1-3Q24 results: revenue of 2.67 billion yuan, a year-on-year decrease of 19.3%, and net profit to mother of 0.38 billion yuan, a year-on-year decrease of 47.3%, in line with market expectations. In a single quarter, 3Q24 revenue was 0.78 billion yuan, down 34.3% year on year, and net profit to mother was 0.11 billion yuan, down 55.2% year on year.

Gross margin improved month-on-month. The 3Q24 company's comprehensive gross margin was 30.1%, down 8.9ppt year on year and up 3.7ppt month-on-month. We estimate that the share of settlement revenue from overseas DDP models with slightly lower gross margins decreased month-on-month. The 3Q24 company's expense ratio for the period was 18.2%, up 3.5ppt year on year. Among them, sales/management/R&D/finance expense ratios were +0.9pp/ +0.1pp/ +3.6pp/ -1.1ppt, respectively. We estimate that this is mainly due to a decrease in revenue scale. 1-3Q24 financial expenses increased by 81.77 million yuan year over year. We believe this is mainly due to exchange losses due to exchange rate changes. 1-3Q24/3Q24 The company's net profit margin was 14.1%/13.7%, a year-on-year decrease of 7.5 ppt/6.4ppt.

Operating cash flow maintained a net inflow. 1-3Q24/3Q24 The company's net operating cash flow inflow was 0.23 billion yuan/0.12 billion yuan, with a year-on-year increase of 0.24 billion yuan/0.21 billion yuan, respectively. As of the end of 3Q24, the company's notes and accounts receivable were 2.02 billion yuan, a year-on-year decrease of 27.23 million yuan, and contract liabilities were 2.07 billion yuan, a year-on-year decrease of 4.28 million yuan.

Development trends

Pay attention to the improvement in the domestic inspection pace and the recovery in demand. Since 4Q23, the pace of domestic downstream lithium battery customer acceptance has been slowing down, and the company's revenue and profit growth has been affected to a certain extent. We continue to pay attention to the subsequent improvement in the domestic downstream customer acceptance pace, which has contributed to the increase in the company's revenue growth, and the increase in new orders brought about by demand for new purchased equipment.

The share of overseas business has increased, and attention is being paid to order fulfillment. We estimate that 1-3Q24's overseas revenue may account for about 50%, overseas orders account for about 70% of new orders, and the share of overseas business has increased significantly. We believe that, on the one hand, considering that the gross margin of overseas DDP order settlement is slightly lower, and we are concerned about the trend of subsequent DDP order settlement coming to an end and overseas business profit margins recovering; on the other hand, the overseas order project cycle is longer, and we are concerned about the implementation process and revenue confirmation of subsequent projects.

Profit forecasting and valuation

Maintain an outperforming industry rating. Maintaining the 2024/2025 profit forecast of 0.51 billion yuan/0.71 billion yuan, the current transaction is 21.0x/15.1x 2024/2025 P/E. Considering the upward valuation center, the target price was raised 9% to 20.80 yuan, corresponding 24.6x/17.6x 2024/2025 P/E, with 17% upward space.

risks

The recovery in domestic demand fell short of expectations, and the implementation of overseas projects fell short of expectations.