The company released three quarterly reports: 9M24 achieved revenue of 71.9 billion yuan, year-on-year net profit of -19.74%, of which 24Q3 achieved revenue of 26.1 billion yuan, +13.25%, and net profit to mother of 1.578 billion yuan, year-on-year, -24.92% year-on-year, slightly lower than our expectations (1.659 billion yuan), mainly due to a sharp decline in gross margin for construction projects. We believe that the impact of risk events is gradually weakening. The company's Q3 revenue is expected to resume growth, and Q4 profits are expected to improve. As a strategic hinterland, Sichuan Province supports the implementation of the Western Development and Yangtze River Economic Belt development strategies. It is expected to maintain good investment intensity in the future, and the company is expected to fully benefit and maintain a “buy” rating.

The 24Q3 cost ratio was optimized, but the year-on-year decline in gross margin dragged down the comprehensive gross profit margin of the 9M24 company with a net interest rate of 15.76%, of which 24Q3 was 15.54%, or -4.26pct year on year. We expect the share of mainly high-margin investment projects to decrease. The cost rate for the 9M24 period was 6.90%, +0.79pct year on year, 7.21% year on year 24Q3, -1.28pct year on year, of which the sales/management/R&D/finance ratio was +0.02/-0.34/-0.79/-0.18pct year on year. 9M24 net profit margin -2.02pct yoy to 6.64%, of which 24Q3 was 6.05%, -3.07pct yoy, and -0.03pct month-on-month.

24Q3 cash flow improved year over year

9M24 net cash flow from operating activities was -5.6 billion yuan, with a year-on-year decrease of 1 billion yuan, a payment/cash ratio of 84.0%/93.8%, and -3.9/-6.4 pct, of which 24Q3 net -0.9 billion yuan, a year-on-year decrease of 1.2 billion yuan, and the payment/payout ratio was 37.7/-50.2 pct to 67.6%/73.7% year-on-year. The interest-bearing debt ratio at the end of 24Q3 was 34.7%, +3.71 pct year on year, and the balance ratio was 79.5%, +1.21pct year on year.

New orders maintained high growth, and the layout of new industries accelerated

9M24 won the total bid amount of 77.6 billion yuan, -18.8% year-on-year, of which the 24Q3 bid was 18.5 billion yuan, -15.0% year-on-year, and the decline was 18.5pct narrower than Q2. In terms of new industries, the company is steadily promoting the development of new minerals and lithium battery materials and green power clean energy businesses: 1) Direct sales of foreign Asmara copper-gold polymetallic ore mines have achieved sales of 0.03 million tons, and the cumulative domestic production and sales of phosphate ore exceed 0.6 million tons, and yellow phosphorus.

0.02 million tons, Kasumishi over 0.075 million tons; 2) The cumulative production and sales of lithium iron phosphate cathode materials have exceeded 0.012 million tons, and XinlitiXiang has achieved batch supply to some customers; in terms of clean energy, the installed capacity of clean energy rights under construction and operation (including escrow) is about 5.4 million kilowatts, +0.4 million kilowatts compared to the previous year.

Profit forecasting and valuation

Driven by the Western Development Strategy, future investment in the Sichuan and Chongqing region is expected to maintain strength, which is conducive to the company's medium-term demand stability. We adjusted the company's 24-26 net profit forecast to 8/7.6/7.5 billion yuan (previous value 6.6/6.2/5.9 billion yuan), and the comparable company's 25-year wind consensus average expected average of 10xPE. Considering that the company's 23-year dividend rate of 6.8% was higher than the comparable average of 2.8%, the company was given a 25-year 12xPE, and adjusted the target price to 10.50 yuan (previous value) 6.05 yuan), maintaining a “buy” rating.

Risk warning: Lithium battery mining and materials business development falls short of expectations; order execution falls short of expectations.