Brief performance review

On October 29, the company released its quarterly report for the year 24. 24Q1-Q3 achieved revenue of 1.91 billion yuan, +5.72% YoY; net profit to mother of 0.227 billion yuan, or -6.90% YoY. Among them, single Q3 achieved revenue of 0.642 billion yuan, +3.06% year over year; realized net profit of 0.075 billion yuan to mother, -8.75% year over year.

Management analysis

The company signed a large number of new orders in 3Q24, and contract liabilities increased significantly. We are optimistic about long-term revenue growth.

According to the Wind Investor Interactive Platform, orders for new gas turbines will exceed 137 billion US dollars in the next 10 years, and the maintenance market will reach 23.552 billion US dollars per year for the next 5 years, so the market space is vast. In the gas turbine localization process, the company undertakes the task of localizing turbine blades for major models. Customers include industry leaders such as China Joint Recombustion, Shanghai Electric, Dongfang Electric, Aviation Combustion Engine, Longjiang Guanghan, etc. At the same time, it also supplies hot end components such as moving blades, guide vane, and protective rings in batches to overseas customers such as Siemens and Baker Hughes. As of September 30, '24, the company had on-hand gas turbine orders of about 0.8 billion yuan, of which new orders in August/September alone reached 0.4 billion yuan. By the end of the third quarter, the company's contractual liabilities reached 0.171 billion yuan, up 0.117 billion yuan from the end of the second quarter. The company currently has a large number of orders, and is optimistic about the long-term growth of the company's gas turbine business revenue.

Revenue and profit increased month-on-month in the third quarter, and profitability tended to improve. According to the company announcement, 3Q24 achieved revenue of 0.642 billion yuan, +3.06% year-on-year, and +5.94% month-on-month; realized net profit of 0.075 billion yuan, -8.75% year-on-year, and +22.95% month-on-month, and revenue and profit increased month-on-month. 3Q24 achieved a net profit margin of 10.88%, up 1.73 pcts from the second quarter, and profitability is improving.

It is proposed to issue convertible bonds to raise capital and expand production, and it is optimistic that the company's overall competitiveness will improve. According to the company's announcement, the company plans to issue convertible bonds to raise no more than 1.5 billion yuan for blade chassis processing and coating projects, intelligent upgrading projects for advanced nuclear energy materials and key components, and supplementary working capital. The fund-raising project helps the company form a complete blade and chassis production, processing and coating production chain, and enhances the company's core competitiveness in the field of aero engine and gas turbine components. At the same time, it helps the company expand the production capacity of advanced nuclear energy materials, further enhance the technical level of the company's existing products, optimize the product structure, expand the scale of operation, and improve the company's overall competitiveness and profit level.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue in 2024-2026 to be 2.764/3.265/3.865 billion yuan, net profit to mother 0.39/0.468/0.58 billion yuan, corresponding PE is 24/20/16X, maintaining a “buy” rating.

Risk warning

RMB exchange rate fluctuation; raw material price fluctuation; downstream demand falls short of expectations; promotion of low-altitude application scenarios falls short of expectations