This report is read as follows:

23Q3 performance is in line with expectations, profitability continues to improve; the industry capital expenditure boom continues, the proportion of deep-sea business is expected to increase, high-end valve production line is expected to land by the end of 23, promoting the company's secondary growth.

Main points of investment:

Maintain the overweight rating. Due to the high prosperity of the oil service industry, the company has sufficient orders on hand, the proportion of high value-added orders such as deep-sea business continues to rise, and the landing of high-end valve production lines is expected to bring a new business growth curve. From 2023 to 2025, the EPS was 0.95, 1.34, 1.84, and the target price was 36.18, respectively, and the "overweight" rating was maintained.

23Q3's performance is in line with expectations. The company released the third quarterly report of 2023, with revenue of 936 million yuan / + 34.04% and net profit of 124 million yuan / + 26.05% in the first three quarters of 2023; revenue of 336 million yuan / + 18.32% and net profit of 43 million yuan / + 3.48% in the third quarter alone. The performance is in line with expectations.

The high prosperity of the deep-sea business leads to the improvement of profitability, and the high-end valve is expected to promote the company's secondary growth. The company's profitability has improved, with a single 23Q3 gross profit margin of 23.78% and a month-on-month ratio of + 0.66pct. We speculate that the increase in the proportion of high value-added business such as deep sea will lead to an increase in the company's gross profit margin. Single 23Q3 homing net interest rate is 12.85%, month-on-month-2.5pct, the month-on-month decline in homing net interest rate is mainly due to a large number of exchange gains made by 23Q2, excluding this part of the impact, the company's overall profitability has increased steadily. The company's fund-raising project 350MN multi-directional die forging project has entered the equipment installation and commissioning stage and is expected to be put into production by the end of 23rd. The production line of high-end valves and piping parts is expected to open up a new growth curve of the company.

The high oil price continues to promote the high scene of oil service equipment. The Rystad Energy September report estimates that the overall international Brent oil price will remain above 85 US dollars per barrel in 23-24 years. At present, the oil price is above the development oil price of most oil and gas assets. Since 2022, there is still a lot of room for the capital of oil companies to rise compared with the previous cycle. It is expected that the capital expenditure of oil companies will continue to grow in the future. The increase in capital expenditure of the crude oil industry will gradually be transmitted to equipment manufacturers, promoting the high prosperity of the oil service equipment industry.

Risk hint: the progress of production capacity construction is not as expected, and the risk of price fluctuation of raw materials such as special steel