Core views

24Q3 is the traditional low delivery season for traditional coal chemical equipment and engineering businesses, which led to a 35% month-on-month decline in the company's revenue; at the same time, the gross margin of this part of the product was high, causing the company's overall gross margin to drop 12 pcts month-on-month. The Q3 gas operation business began to be consolidated for the full quarter. The estimated revenue is 0.24-0.28 billion yuan, and the gross margin is about 6-8%. The company lays out core equipment and processes such as electrolyzers, gasifiers, and purification devices around the green hydrogen and green alcohol industry chains. It is expected to become the second growth curve for the company's profits under the trend of the transition from coal chemicals to green chemicals and the increasing penetration rate of green hydrogen and hydrogen-based products.

occurrences

The company achieved revenue of 1.667/0.128/0.125 billion yuan in the first three quarters, or +12%/+26%/+33% over the same period; of these, 24Q3 achieved revenue/net profit to mother/ net profit of 0.563/0.037/0.036 billion yuan, +9%/+13%/+15%, month-on-month.

Brief review

1. Traditional main business: The quarterly delivery pace affects the revenue of the main coal chemical industry 1) Revenue: 24Q3 The revenue of traditional coal chemical equipment and engineering businesses is expected to be 2.8-3.0.2 billion yuan, accounting for 50-57% of revenue. The third quarter is the traditional low season for coal chemical equipment delivery, leading to a 35% month-on-month decline on the company's revenue side;

2) Profit: The gross margin on the traditional equipment and engineering side of Q3 is expected to be about 25-30%, which is higher than the gross profit margin of the company's gas operation business. Quarterly fluctuations in the confirmed structure caused the company's overall gross margin to decline by 12 pcts month-on-month

2. Industrial gas operation: In April 2024, the company increased the capital of the original shareholding company Aerospace Hydrogen Energy, held a 34.35% stake in Aerospace Hydrogen Energy, became the controlling shareholder of Aerospace Hydrogen Energy, and included Aerospace Hydrogen Energy in the scope of the company's consolidated statements. After the capital increase was completed, the industrial gas operation business became an important part of the company's business. The Q3 gas operation business began to be consolidated for the full quarter. The estimated revenue is 0.24-0.28 billion yuan, gross margin is about 6-8%, and the consolidated profit is expected to be about 9 million yuan to -12 million yuan.

3. Core equipment in the hydrogen energy industry chain:

1) Green hydrogen: The company lays out core equipment around the hydrogen energy industry chain. Currently, the 100 alkaline electrolysis hydrogen production system has successfully obtained the hydrogen energy leader certification, and the 2000 electrolyzer has gone offline;

2) Byproduct hydrogen purification equipment: The first hydrogen deep purification system and trace removal system have completed trial operation and can be used to purify chemical by-product hydrogen; 3) Green alcohol: It has biomass gasification technology and equipment reserves, and is expected to become the second growth point in the company's profit under the trend of the transition from coal chemicals to green chemicals and the increasing penetration rate of green hydrogen and hydrogen-based products.

Investment proposal: As the company increased its capital to hold Aerospace Hydrogen Energy Co., Ltd., the 2024 company is expected to achieve operating income of 3.7 billion yuan and total profit of 0.258 billion yuan, showing rapid year-on-year growth. Net profit to the mother is expected to be 0.244, 0.285, and 0.332 billion yuan in 2024, 2025, and 2026, corresponding to 8, 33, and 28 times P E3, maintaining a “buy” rating.

Risk analysis

1) Coal chemical capital expenditure has weakened. The company's proprietary equipment is mainly aimed at gasification furnaces and other products in the coal chemical industry. If the capital expenditure of downstream coal chemical companies falls, it will cause demand for new production capacity construction to weaken and affect the company's revenue contribution. Assuming that the company's coal chemical industry orders change in the same direction as the overall capital expenditure of the industry, unit capital fluctuations will correspond to proprietary equipment products accounting for 60-70% of the company's revenue.

2) The industrialization of new technology falls short of expectations. The company's electrolyzer products are currently in the testing stage. If future progress in introducing new products to the market falls short of expectations, it will affect the company's revenue growth in new technology products. We expect hydrogen energy-related equipment to generate sales revenue starting in 2024, accounting for about 4-5% of total revenue. If customer imports fall short of expectations based on testing progress, this portion of revenue will be affected.

3) The competitive pattern of the industry is intense. If market competition for products such as coal chemical equipment and electrolyzers intensifies, it may lead to a decline in prices and profits, and the company's performance will have a certain impact.