Key investment points

Incident: The company released the 2024 Q3 report, and the 2024 Q3 performance increased 10% year on year 1) Results for the first three quarters of 2024: The company responded positively to national policies, seized market opportunities, and further strengthened accurate connections with key customers. The first three quarters of 2024 achieved operating income of 21.99 billion yuan, an increase of 0.4% year on year; net profit of 2.18 billion yuan, up 10.3% year on year; net profit without return to mother was 2.09 billion yuan, up 9.4% year on year. The results are in line with market expectations.

2) 2024Q3 performance: 2024Q3 achieved operating income of 7.1 billion yuan, down 3.4% year on year and 5.7% month on month; net profit to mother was 0.64 billion yuan, up 10% year on year and 23.4% month on month.

2024Q3 net interest rate increased year on year, with significant results in cost reduction and efficiency 1) In terms of profit margin: gross margin for the first three quarters of 2024 was 32.5%, a decrease of 0.1 pct year on year; net interest rate was 12.8%, up 1.1 pcts year on year. 2024Q3 gross margin was 31.4%, a year-on-year decrease of 0.5 pcts and a month-on-month decrease of 3.9 pcts; net margin was 11.5%, up 0.9 pcts year over year, and a decrease of 3.0 pcts month-on-month.

2) In terms of period expenses: The cost rate for the first three quarters of 2024 was 17.3%, with a year-on-year increase of 0.2 pct, of which the sales expense ratio was 3.2%, a year-on-year decrease of 0.3 pct. The decrease in sales expenses was mainly due to the company's increased control over marketing expenses; the management expense ratio was 8.5%, up 0.2 pct year on year. The increase in management expenses was mainly due to increased business volume; the R&D expense ratio was 6.2%, an increase of 0.4 pct year on year; the financial expense ratio was -0.6%, a decrease of 0.1 pct year on year. The decrease in financial expenses was mainly due to interest income during the reporting period increase.

The coal machine industry is driven by multiple drivers, and leading central enterprises are expected to benefit

1) Industry demand: replacement, intelligence, small construction of coal mines, multiple export drivers.

2) Competition pattern: Industry concentration continues to increase, leading central enterprises have fully benefited.

The company's entire industrial chain layout has outstanding safety and intelligence

1) Leading coal machine central enterprises, integrating scientific research and production to withstand cyclical fluctuations.

2) The subsidiary's intelligent business leads the industry, and the demand for coal mine safety equipment is urgent.

Investment advice and profit forecasting

The company's revenue for 2024-2026 is expected to be 30, 30.9, and 32.8 billion yuan, respectively, with year-on-year growth rates of 0.2%, 3.2%, and 5.9%, respectively. Net profit attributable to mother was 2.55, 2.68, and 2.89 billion yuan respectively, with year-on-year growth rates of 8.3%, 4.8%, and 8.1%, respectively. PE was 10.3X, 9.8X, and 9.1X, maintaining a “buy” rating.

Risk warning: Coal prices fall short of expectations; raw coal production falls short of expectations; coal machine exports fall short of expectations; competitive market share falls short of expectations.