Description of the event

The company released its 2024 three-quarter report. 24Q1-3 achieved revenue of 0.52 billion yuan, up 30.24% year on year; net profit to mother 0.093 billion, up 33.49% year on year; net profit after deducting non-return to mother 0.091 billion, up 40.82% year on year. 24Q3 achieved revenue of 0.18 billion, up 25.62% year on year and 0.79% month on month; net profit to mother was 0.026 billion, down 28.05% year on year and 28.19% month on month; net profit after deducting non-return to mother was 0.025 billion, down 28.18% year on year and 29.46% month on month.

Incident comments

Maintaining medium- to high-speed revenue growth in a single quarter reflects continued downstream demand, or actual performance was superior to the apparent results due to equity payments. 24Q3 achieved revenue of 0.18 billion, a year-on-year increase of 25.62%, and a month-on-month increase of 0.79%, maintaining steady growth at medium to high rates.

The company issued an equity incentive draft on April 17. Under the accounting cost of 16.99 yuan/share, the 24-year equity amortization cost is 18.9084 million yuan. The cost rate during the 24Q3 period was 22.44%, up 7.64 pcts year on year, and 5.34 pcts; of these, the sales expense ratio was 2.47%, up 0.43 pcts year on year; the management fee ratio was 9.37%, up 2.57 pcts year on year; the R&D expense ratio was 8.73%, up 3.06 pcts year on year; the financial expense ratio was 1.86%, up 1.57 pcts year on year, or mainly due to amortization of equity payment expenses.

Profitability in the third quarter may be under short-term pressure due to changes in product structure, prices, and exchange gains and losses. 24Q3 gross sales margin was 40.47%, down 6.13 pcts year on year and 2.33 pcts month on month; net sales margin was 14.03%, down 10.4 pcts year on year and 5.84 pcts month on month; gross margin and net margin declined significantly or reflected fluctuations in the structure and price of products delivered in the third quarter, and the gross margin of the company's foreign trade business may be affected by short-term changes in exchange rates such as the US dollar.

The expansion and implementation of production capacity, and the high increase in advance payments and contract liabilities reflect that the company is actively preparing for production under a boom in demand, and the resonance of domestic and foreign trade has enabled long-term growth. By the end of Q3, the inventory balance at the end of Q3 was 0.191 billion, up 15.79% year on year; accounts receivable and bill balance was 0.358 billion, up 40.96% year on year; advance payment balance was 0.019 billion, up 137.01% year on year; balance of construction under construction was 0.136 billion, down 35.63% year on year; fixed asset balance was 0.788 billion, up 60.55% year on year; contract debt balance was 0.003 billion, up 39.43% year over year.

Profit forecast and valuation: The company's net profit due to mother in 2024-2026 is expected to be 0.12, 0.17, and 0.24 billion, respectively, up 31%, 44%, and 39% year-on-year, and corresponding PE is 38, 26, and 19 times, respectively.

Risk warning

1. Overseas precision forging blade business delivery falls short of expectations;

2. Domestic high-performance engine volume falls short of expectations;