Zhongfu Shenying released three quarterly reports: Q3 achieved revenue of 386 million yuan (yoy-30.09%, qoq +36.16%), and net profit attributable to the parent company of -33.3122 million yuan (yoy-146.16%, qoq-98.14%). In Q1-Q3 of 2024, the revenue will be 1.119 billion yuan (yoy-30.46%), the net profit attributable to the parent company will be -8.3388 million yuan (yoy-102.84%), and the non-net profit will be -75.0851 million yuan (yoy-128.57%). The company's net profit attributable to the parent company in the third quarter was lower than our expectation (-27 million yuan), mainly due to the continuous decline in carbon fiber prices and the marginal pressure on the cost side.

1-9M24 two-way price and cost squeezing, the company's profitability continued to decline, gross profit margin in the first three quarters of 24 was 19.26%, year-on-year -17.2pct, 24Q3 gross profit margin was 11.6%, year-on-year/month-on-month -20.5/-8.7pct; From the cost side, according to Wind, the average spot price of acrylonitrile in the first three quarters of 24 was 9,276 yuan/ton, +2.4% year-on-year, and the average price in the third quarter was 8,684 yuan/ton, +2.1%/-12.6% year-on-year/month-on-month, and the cost of raw materials fluctuated; From the price side, according to Baichuan Yingfu, the average market price of domestic T700-12K/T300-12K/T300-24K/T300-48K in 24Q3 was 113/87/77/72 yuan/KG, a year-on-year decrease of -30%/-15%/-18%/-15%, a month-on-month decrease of 3%~12%, continuing the downward trend in Q2. The cost price was squeezed in both directions, and the company's gross profit margin was under pressure as a whole.

The absolute value of expenses decreased year-on-year during the 1-9M24 period, and the rate of income dilution weakened The expense ratio in the first three quarters of 24 years was 24.92%/+6.5pct year-on-year, of which the sales/management/R&D/financial expense ratio was 1.80%/12.94%/8.28%/1.90%, +0.86pct/+4.36pct/-0.87pct/+2.18pct year-on-year; The expense ratio during the single quarter in Q3 was 25.69%, +6.92pct year-on-year, but the absolute value of the accumulated period expenses in Q3 and the first three quarters decreased year-on-year, and the increase in the rate was mainly due to the reduction of revenue scale and the weakening of the ability to dilute expenses. The net profit margin attributable to the parent company in the first three quarters of FY24 was -0.75%, -18.97pct year-on-year, and -8.6% in 24Q3, -21.7/-2.7pct year-on-year/quarter-on-quarter.

1-9M24 Operating cash flow is improving, repayment may be delayed

As of the end of the third quarter, the company's debt-to-asset ratio/interest-bearing debt ratio was 48.5%/25.0%, respectively, +4.0/+1.0pct year-on-year. The net operating cash flow in the first three quarters was 230 million yuan, a year-on-year increase of +494 million yuan; The net operating cash flow in 24Q3 was 205 million yuan, +340 million yuan/+150 million yuan year-on-year/month-on-month, of which the cash-to-cash ratio/cash-to-cash ratio in 3Q24 was 98.3%/23.8% respectively, +55.8/-47.2pct year-on-year.

Earnings Forecast and Valuation

Considering the continued pressure on carbon fiber prices, we lowered the company's net profit attributable to the parent company in 24-26 to -0.35/1.02/339 million yuan (previous value of 0.53/1.66/347 million yuan), corresponding to BPS of 5.24/5.25/5.52 yuan. Comparable companies have a 25-year Wind consensus expectation of an average PB of 3.21, considering that the company's production capacity is among the top three in the world, the leading position is stable against the trend, and the demand for the "low-altitude economy" is leading, the demand in the future may be boosted, giving the company a 25-year 5 times PB valuation, and the corresponding target price is 26.19 yuan.

Risk warning: the price of products has fallen sharply, the downstream demand is less than expected, and the price of raw materials has fluctuated sharply.