LK(SH:600388) HTSC·2024-10-20 04:03Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 23.53 [1][5][8] Core Views - The company reported Q3 revenue of RMB 1.982 billion, a year-over-year decrease of 23.47%, while net profit attributable to shareholders was RMB 216 million, an increase of 1.13% year-over-year, which is close to the lower end of expectations [1] - For the first three quarters of 2024, the company achieved revenue of RMB 6.654 billion, down 11.64% year-over-year, and net profit of RMB 647 million, up 0.91% year-over-year, with a non-recurring net profit of RMB 585 million, up 18.23% year-over-year [1] - The company has sufficient environmental orders and is accelerating the development of green electricity and new energy mining equipment businesses, driving performance growth [1] Summary by Sections Revenue and Contracts - In the first three quarters, the company secured new environmental engineering contracts totaling RMB 7.544 billion, compared to RMB 7.922 billion in the same period of 2023, with a contract backlog of RMB 19.213 billion [2] - The growth in the thermal power environmental business is primarily driven by new projects for large thermal power units and upgrades for ultra-low emission equipment [2] Profitability and Financial Metrics - The Q3 gross margin increased by 1.97 percentage points year-over-year to 26.46%, attributed to a higher proportion of revenue from power generation [3] - The net profit margin rose by 2.68 percentage points year-over-year to 10.94% [3] - As of September 30, the company reported a net cash flow from operating activities of RMB 1.164 billion, a year-over-year increase of 101.17% [3] Business Development - The company is advancing its wind and solar green electricity and new energy mining equipment businesses, leveraging opportunities from Zijin Mining's "oil-to-electric" strategy [4] - Several projects, including the Lagocuo and Guyana projects, are in the trial operation phase, while the Duobao Mountain project has received approval for grid connection [4] Future Projections - The company has adjusted its revenue forecasts for environmental engineering while increasing projections for effective utilization of green electricity capacity [5] - Expected net profits for 2024-2026 are RMB 1.028 billion, RMB 1.294 billion, and RMB 1.620 billion, respectively [5] - The target price of RMB 23.53 corresponds to a PE ratio of 19.3 for environmental and 21.1 for new energy sectors in 2025 [5]