Ningbo Jingda released its three-quarter report for 2024. In the first three quarters of 2024, the company achieved operating income of 0.582 billion yuan, +14.81% year-on-year; net profit to mother was 0.119 billion yuan, or +1.66% year-on-year. In Q3, in a single quarter, the company achieved revenue of 0.186 billion yuan, +24.27% year-on-year; realized net profit to mother of 31.0571 million yuan, +26.04% year-on-year.

The company announced the progress of the acquisition. It plans to purchase 100% of the shares of Wuxi Weiyan by issuing shares and paying cash. The transaction price is 0.36 billion yuan, and 50% of the transaction consideration is paid in shares and cash. At the same time, the company plans to raise 0.18 billion yuan in supporting capital by issuing shares to the controlling shareholder Shengzheng Holdings (an enterprise under Ningbo Commerce Group).

The company's Q3 revenue and net profit growth rate both exceeded 20%. The judgment was mainly due to the low base for the same period last year.

In Q3 2023, due to factors such as shipping and the pace of product inspection, the company's revenue and net profit returned to mother were under pressure. The above factors have been gradually mitigated since the fourth quarter of '23.

The gross profit margin and period expense ratio declined year-on-year, and the return to mother and non-net interest rates did not decrease but increased. 2024Q3, the company achieved a gross profit margin of 34.23%, -10.24pcts year-on-year. At the same time, the company's various expense rates have declined to varying degrees. Q3 The company's sales/management/ R&D/ finance expenses were 9.40%/5.72%/4.28%/-1.66%, respectively, -1.96/-1.23/-1.29/ -2.71 pct. Taken together, the company's Q3 return to mother and deducted non-net interest rates all rebounded year-on-month. The company's return to mother/deducted non-net interest rates were 16.76%/16.71%, respectively, +0.28/+0.73pct year over year, and +2.05/+0.64pct month-on-month.

The progress of the subject of the acquisition was announced, and the purchase price was 10 times that of PE in 24 years. On April 30, 2024, the company announced the draft acquisition for the first time. The announcement mentioned that the purchase price did not exceed 0.36 billion yuan. The purchase price announced this time is the upper limit of the previously announced price. For 2022/2023/2024E/2025E/2026E, the net profit of Wuxi Research Institute was 1,545/3743/36.1/38.3/39.7 million yuan respectively, and PE is expected to be 9.97/9.40/9.07 times in 24/25/26, respectively. If the cumulative net profit achieved by Wuxi Research during the performance commitment period is less than 90% of the promised net profit, the performance pledger will pay compensation for the performance commitment.

Resource integration is expected to have a synergetic effect. Wuxi Microresearch is mainly engaged in R&D, production and sales of precision molds, precision stamping parts and microporous EDM machines. At present, the company's products have been sold on a large scale in China, the US and Europe, and has accumulated well-known domestic and international customers such as Midea, Oaks, TCL, Hisense, Johnson Controls, Daikin, Hitachi, Borg Warner, and Huayu Pierburg. There is a strong synergy between the company's main business and Jingda's heat exchanger equipment business. In the future, Ningbo Jingda and Wuxi Weiyan will integrate technology, customer resources, management, capital platforms, etc., to give full play to the synergy of win-win cooperation.

Investment advice: Ningbo Jingda's performance has been growing steadily over the years. After the acquisition of Wuxi Weiyan, the business is expected to have a synergy effect. Considering that Wuxi Microresearch is expected to be combined later, we will adjust our profit forecast for the company.

The company is expected to achieve operating income of 0.807, 1.153, and 1.273 billion yuan in 24/25/26, and net profit of 0.176, 0.233, and 0.254 billion yuan, respectively, corresponding to PE 19.2/14.5/13.3 times PE. Maintain a “Highly Recommended” rating!

Risk warning: Deterioration of the international trade environment, intensification of market competition, underperformance of acquisition targets, etc.