Description of the event

The company released its 2024 three-quarter report. 2024Q3 achieved operating income of 0.394 billion yuan, down 5.64% year on year, up 15.97% month on month; net profit to mother was 0.067 billion yuan, down 6.34% year on year, up 8.72% month on month; net profit without return to mother was 0.065 billion yuan, down 1.01% year on year and up 8.46% month on month.

Incident comments

On the shipping side, the company's sales volume increased in the third quarter compared to the same period last year. Shipments in the first three quarters of this year will increase by more than 40% over the same period last year, and it is expected that the growth trend will continue throughout 2024. There was a year-on-year decline in the 2024Q3 revenue side, mainly due to a decrease in the NMP price of raw materials. Some customers used the net payment method, resulting in some material costs not being included in the sales price. 2024Q3's sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 0.87%, 5.18%, 7.52%, and 1.33%, respectively. They remained flat year over year, +0.4 pct, +1.8 pct, and -0.2 pct, respectively. The month-on-month ratio achieved -0.1 pct, -1.8 pct, -0.8 pct, and +0.3 pct, respectively. The increase in R&D expenses meant that the company continued to increase investment in scientific research. In the end, the company achieved net profit of 0.067 billion yuan to mother, with a net profit margin of 16.94%.

In terms of other financial indicators, the company achieved a net operating cash flow inflow of 0.018 billion yuan in 2024Q3, which was corrected from month to month.

In terms of capital expenditure, 2024Q3 capital expenditure was about 0.023 billion yuan, which is a significant decrease compared to the same period last year. The company is steadily promoting overseas production capacity construction in line with changes in market demand; clients have achieved supply to leading Japanese customers, and mainstream Korean customers have now shipped products, which are progressing smoothly; in addition, the company is actively importing single-wall pipes and related compatible products to customers, and some domestic customers have already placed 100-ton orders.

We continue to be optimistic that the company, as the global leader in carbon nanotube conductive agents, can follow the lithium battery industry to achieve continuous rapid growth. The company's net profit attributable to shareholders of the parent company in 2024 is estimated to be about 0.26 billion yuan, which is about 53 times the corresponding valuation. Maintain a “buy” rating.

Risk warning

1. The risk of a downturn in industry sentiment;

2. The risk that profitability falls short of expectations due to increased competition in the industry.