Core views

The year-on-month decline in the company's 24Q3 revenue was mainly due to the decline in demand for photovoltaic power plants, the impact of a decline in new production capacity on the equipment side, and the off-season in the thermoelectric power operation season. The Q3 gross profit margin was 22%, +9pct month-on-month, mainly due to the structural impact of the fixed revenue business and the decline in revenue in the low-profit power plant engineering business. The company initiated dividends for the first three quarters, with a cash dividend of 0.1 yuan per share. Q4 is expected to maintain the dividend ratio of previous years. Assuming a cash dividend of 0.35 yuan per share based on the previous year's ratio Q4, a total cash dividend of 0.45 yuan per share for the whole year.

occurrences

The company achieved revenue/net profit after deduction of 7.23/0.48/0.23 billion yuan in the first three quarters, -6%/-7%/-53% year-on-year; of these, 24Q3 achieved revenue/net profit after deducting 1.47/0.084/0.026 billion yuan, -46%/-20%/-75%, and -48%/-60%/+17% month-on-month.

Brief review

1. Revenue: Q3 revenue 14.75E, -48% month-on-month, mainly:

1) Over the past 24 years, the photovoltaic power plant engineering business has been affected by factors such as fluctuations in the price of photovoltaic modules and the severe consumption situation of new energy sources. Installation speed and installed capacity have declined, and Q3-4 is expected to continue to be affected

2) The equipment side was affected by the relocation and rising production capacity, and revenue declined. At present, overseas orders have been expanding smoothly in 24 years. Ongoing orders have increased year-on-year. It is expected that the delivery cycle will soon be entered next year, and device-side revenue is expected to recover

3) Thermoelectric operation: Q3 revenue is expected to be 9-10E, accounting for 60-65%. The month-on-month decline is mainly due to a seasonal decline in downstream steam demand in Q3, and an expected recovery in Q4

2. Gross profit margin: Q3 gross profit margin of 22%, +9pct month-on-month, mainly due to the impact of the confirmed business structure, due to the decline in revenue in the low-profit power plant engineering business;

3. Net interest rate: 1) Net interest rate to mother was 8.8%, flat month-on-month. Although the gross margin in Q3 was high, the rate side increased by 8.4 pct due to a 48% month-on-month decline in revenue; 2) Non-net interest rate was 2.2%, down 2.2 pct year on year, mainly due to a decrease in the company's power plant engineering revenue, and the profit decline was obvious; the company began to accrue depreciation and amortization of assets, affecting current profit 4. Dividends for the first three quarters of the company started, and dividends were paid 0.1 yuan per share, Q4 is expected to maintain the dividend ratio of previous years, based on the assumption that In previous years, Q4 paid a cash dividend of 0.35 yuan per share, totaling a cash dividend of 0.45 yuan per share for the whole year.

Investment advice: Net profit due to mother is expected to be 0.747, 0.807, 0.888 billion yuan in 2024, 2025, and 2026, corresponding to 12, 11, and 10 times PE, maintaining a “buy” rating.

Risk analysis

1) Market competition risk: In the context of energy restructuring and a continuous decline in the growth rate of new investment, market competition in the boiler industry is becoming more and more intense, and the company faces the risk of declining market share and gross margin due to increased competition. In terms of municipal environmental protection business, the external macroeconomic and local market environment is under certain pressure, market capacity is shrinking, and competition is more intense. At the same time, the municipal environmental protection industry has certain geographical monopoly and public welfare characteristics, and business development is susceptible to administrative barriers to a certain extent.

2) Product development falls short of expectations. New product development can help enterprises achieve product competitiveness. Continued technological iteration falling short of expectations may lead to a decline in the competitiveness of the company's products, thereby affecting the company's revenue and profit performance. The company's new products are mainly electrolyzers and thermal power flexibility transformation equipment in the equipment field. If the development of new products falls short of expectations, it will affect the company's revenue in the corresponding sector.

3) Risk of fluctuations in raw material prices: Steel is one of the main raw materials in the company's boiler equipment manufacturing business, and coal and natural gas are the main raw materials for the production of cogeneration enterprises under the company. Large fluctuations in the prices of steel, coal, and natural gas will have a certain impact on the company's business performance.