Incidents:

Recently, the company issued an announcement. As of November 30, 2024, the company has repurchased a total of 255,100 shares of the company's shares through centralized bidding through a special securities account for share repurchase. The company is actively buying back, and is also actively laying out various fields of thermal power flexibility transformation and new energy storage. The comments on this are as follows:

The gross margin increased, and the cost ratio increased slightly during the period. The company's gross sales margin for the first three quarters of 2024 was about 19.60%, about +5.06pct year on year; the net profit margin was about 9.43%, +7.63pct year on year. As overseas business strengthens in the future, profitability is expected to increase further. The company's cost ratio for the period was 12.90%, +1.56pct. Of these, sales/management/R&D/finance expenses accounted for 2.09%/4.83%/5.82%/0.17% of operating income, respectively. The main reason was that R&D and management expense ratios were +1.56pct and +0.29pct year-on-year, and overall cost control was good. The company achieved net operating cash flow of 0.151 billion yuan in the first three quarters of 2024, of which net operating cash flow of 0.129 billion yuan was achieved in single Q3.

We have plenty of orders in hand, and diversified layouts expand our growth. In the first three quarters of 2024, the company added a total of 4.587 billion yuan in new orders, including 1.497 billion yuan for waste heat boilers, 0.699 billion yuan for clean and environmentally friendly energy equipment, 1.954 billion yuan for solutions, and 0.437 billion yuan for spare parts and services; as of September 30, 2024, the company had ongoing orders of 6.414 billion yuan, and the next four business sectors established growth Tap opportunities and invest resources. The company is full of orders in hand. At this stage, the proportion of the company's overseas direct signing methods is gradually increasing, and the diversified layout has achieved remarkable results.

The transformation of thermal power flexibility is expected to accelerate. According to the “National Implementation Plan for the Rehabilitation and Upgrading of Coal Power Units” issued by the National Development and Reform Commission and the Energy Administration, the flexibility transformation of coal power units should be completely revised. During the “14th Five-Year Plan” period, 0.2 billion kilowatts of flexible transformation will be completed, and the system adjustment capacity will be increased by 30-40 million kilowatts to promote the consumption of new energy sources. In August 2024, the National Development and Reform Commission and the National Energy Administration issued the “Implementation Plan for Large-scale Equipment Renewal in Key Energy Areas”, which proposed “by 2027, the scale of equipment investment in key energy fields will increase by more than 25% compared to 2023. The company cooperates with Hepu Energy to explore advanced peak shifting technology and solutions for comprehensive thermal power flexibility transformation to enhance the power grid's ability to consume clean energy. Relying on steam pumping and energy storage technology solution capabilities, equipment manufacturing capabilities, and mature engineering, the company's demonstration projects will gradually be put into operation.

Investment rating: The company's net profit for 2024-2026 is estimated to be 0.405 billion, 0.44 billion, and 488 million, respectively. The corresponding PE is 20x, 18x, and 17x, respectively. It is covered for the first time, giving it an “increase in wealth” rating.

Risk warning: Order delivery falls short of expectations; risk of failure of profit forecasting and valuation models