The company publishes three quarterly reports

The company released the third quarter report of 2023, as of 2023Q3, the operating income was 3.602 billion yuan (+ 76.22%), the net profit was 72 million yuan (+ 795.39%), the net profit after deducting non-return was 47 million yuan (+ 476.34%), the net cash flow of operating activities was-166 million yuan (+ 43.62%), and the weighted average return on net assets was 2.34% (+ 2.07pct). Revenue and net profit continued to grow.

The subsidiary consolidated statement increases the expense rate, which affects the short-term profit margin 2023Q1-Q3, and the expense rate of each period of the company is higher than that of the medium report. Among them, the sales cost increased by 82.9% compared with the same period last year, and the sales expense rate was 4.7%. On the one hand, it was affected by Songyang compressor, Matsuyang cooler and Songyang refrigeration, on the other hand, the company's business promotion was better and sales orders increased. Management expenses increased by 58.8% year-on-year, and the rate of management expenses reached 4.8%. In terms of financial expenses, financial expenses increased by 199% compared with the same period last year, and the expense rate was 0.7%. In addition to consolidation factors, the increase in interest on M & A loans also had an impact. From the R & D side, the company's R & D expenses increased by 120% compared with the same period last year, and the R & D expenditure rate increased to 3.2%, an increase of 0.64pct over the same period last year. The reason is that although the inclusion of subsidiaries in the merger has led to the overall R & D expenses, more of it comes from the company's continued increase in product research and development.

Optimistic about the company's continuous expansion in the field of industrial and commercial refrigeration, all business lines are expected to achieve high growth in the deep ploughing industry for many years, with strong cold and hot technology strength, which is close to the technical level of the main international competitors in the industrial refrigeration field, and has achieved catch-up in some areas; the company continues to undertake key projects in the commercial refrigeration field; and continues to develop in new business areas such as CCUS, energy storage and thermal management. We believe that after the acquisition, Matsuyang can achieve coordination with the company's original business, which is conducive to the future development of the company's business.

Investment suggestion

Considering the good development momentum of food and agricultural cold chain and industrial refrigeration equipment and the perfect layout of other new business, we are optimistic about the long-term development of the company in the future. However, in the short term, due to the merger of Songyang Refrigeration, Songyang Compressor and other subsidiaries, the expense rate is slightly higher than our previous assumption, so we revise the profit forecast as follows:

The projected operating income from 2023 to 2025 is 45.17 pound 5605pm 6.537 billion yuan (the former value is 4754pm 58.30 / 6.929 billion yuan), the projected return net profit from 2023 to 2025 is 0.89pm 2.04pm 302 million yuan (the former value is 110pm 241pm 349 million yuan), and the corresponding EPS from 2023 to 2025 is 0.11apace 0.24max 0.36 yuan (the former value is 0.13pm 0.290.41 yuan). The PE of the company's current share price is multiple of 49-21-14. Maintain a "buy" investment rating.

Risk hint

1) the risk of policy fluctuation; 2) the risk of intensified market competition affecting profit margins; 3) the risk of large fluctuations in raw materials; 4) the risk that the information based on the research is not updated in time and fails to fully reflect the latest situation of the company.