1H22's performance is in line with previous forecasts and lower than our expectations.
The company announced 1H22 results: revenue was 1.035 billion yuan, down 37.1% from the same period last year; net profit from home was 122 million yuan, corresponding to 0.15 yuan per share, down 63.7% from the same period last year. The performance was in line with previous forecasts, lower than our expectations, mainly due to the impact of the epidemic and macroeconomic downturn, weakening sales, and rising raw material prices eroded profits. In a single quarter, 2Q22's revenue was 419 million yuan, down 44.0% from the same period last year, and its net profit was 50 million yuan, down 64.6% from the same period last year.
The revenue of the main business has declined and the gross profit margin has decreased. According to the classification of the income generated by the contract, the income of crushing hammer and hydraulic parts of 1H22 Company is 434 million yuan respectively. According to the statistics of the business unit, the revenue of 1H22 crushing hammer / hydraulic parts decreased by 38.56% and 34.78% compared with the same period last year. 1H22/2Q22 's comprehensive gross profit margin fell by 5.1/7.2ppt to 30.7% and 29.2% respectively, mainly due to fluctuations in the price of raw material steel, resulting in increased pressure on the company's cost control.
The expense rate rises and the company's profitability decreases. The sales / management expense rate of 1H22 increased by 1.0/1.6ppt to 4.7% compared with the same period last year, while the R & D expense rate decreased by 0.1ppt to 5.0% year-on-year.
1H22/2Q22 's net profit margin fell by 11.8% to 11.8% compared with the same period last year, with a decline in profitability. Affected by the decline in income, the net cash flow of 1H22's operating activities was 86 million yuan, 66 million yuan less than the same period last year.
Trend of development
The demand of excavator is under short-term pressure, which belongs to the downward trend of demand. According to the National Bureau of Statistics, 1H22 China's investment in fixed assets in infrastructure increased by 9.3% compared with the same period last year, but investment in real estate development decreased by 6.4%, and the area of new housing starts decreased by 36.1% compared with the same period last year. Affected by the decline of real estate construction, the sales of excavators in 1H22 China decreased by 36% compared with the same period last year, and then the demand for broken hammers was under pressure. According to the company announcement, by the end of 2020, the hammer ratio of excavators in China is 25-30%, which is lower than the level of 30-40% in mature markets, and the permeability still has room to increase.
The demand for hydraulic parts slows down in the short term, and there is more space in the medium and long term. Since 2020, the production capacity of hydraulic parts of the company has expanded rapidly, and the growth rate and scale of business have exceeded that of the crushing hammer. At present, the localization rate of excavator crushing hammer in our country has reached a high level, but the localization rate of core hydraulic parts such as pump, valve, motor and so on is less than half. Looking forward, with the improvement of technology, we think the company is expected to increase its market share.
Profit forecast and valuation
Taking into account the downward trend of excavator sales, we downgrade the 2022 EPS 2023 forecast of 18% Universe 9% to 0.28 RMB 0.35. The company's current share price corresponds to 2023 49x Pbig E. Considering the profit reduction, we lowered the target price by 15% to 19.49 yuan, corresponding to 55x Pmax E in 2023, which has 14% upside space and maintained the industry rating of outperforming.
Risk
Sales of excavators fell short of expectations; the volume of new products such as pumps and valves fell short of expectations.