Key points of investment
The growth rate of the company's revenue and net profit in 2022 was relatively fast. The company achieved revenue of 1,121 million yuan in 2022, an increase of 40.29% over the previous year; Guimu's net profit was 248 million yuan, an increase of 54.27% over the previous year; net profit after deduction was 231 million yuan, an increase of 68.78% over the previous year; and basic earnings per share were 1.03 yuan/share, an increase of 47.14% over the previous year. The company plans to distribute a cash dividend of RMB 3.4 million (tax included) for every 10 shares to all shareholders using the total share capital of 241 million yuan on December 31, 2022, to calculate the total proposed cash dividend of RMB 82,070 million (tax included).
The compressor business is generally stable, and the construction machinery business grew rapidly: in 2022, in various business segments: 1) The compressor parts business achieved revenue of 735 million yuan, an increase of 21.56% over the previous year, accounting for 65.55% of revenue. The gross margin reached 39.14%, an increase of 2.12pct over the previous year. 2) The construction machinery parts business achieved revenue of 279 million yuan, an increase of 93.98% over the previous year, mainly due to increased market demand and increased production and sales scale. The construction machinery parts business accounted for 24.90% of revenue in 2022, and gross margin reached 31.64%, an increase of 7.02pct over the previous year.
Overseas market demand is strong, and the contribution of major customers is high: the company's domestic revenue in 2022 was 685 million yuan, up 28.51% year on year; gross profit margin was 34.61%, down 2.94 pct year on year. The company's overseas revenue in 2022 was 434 million yuan, an increase of 63.78% over the previous year, mainly due to the US Infrastructure Act, the steady rise in demand from downstream customers, the company continued to strengthen its overseas market expansion efforts, and the scale of production and sales continued to increase; the gross profit margin was 37.20%, an increase of 11.75 pct over the previous year. The company's top five customers contributed a total of 749 million yuan in sales in 2022, accounting for 66.83% of total annual sales. The company has excellent customer resources, including world-renowned equipment manufacturers such as Johnson Controls, Ingersoll Rand, Carrier Air Conditioning, McQuay, and Caterpillar.
Gross margin continued to recover, and the expense ratio was fully optimized: in 2022, the company's gross margin was 36.47%, an increase of 2.21 pct over the previous year; the return on net assets was 22.11%, an increase of 2.01 pct over the previous year; the return on net assets was 12.62%, an increase of 3.10 pct over the previous year; after deducting non-net assets, the return on non-net assets was 11.79%, an increase of 3.66 pct over the previous year, and the company's profitability was clearly restored. The cost rate for the company period in 2022 was 10.30%, a decrease of 2.20 pct over the previous year. Among them, the sales rate was 0.86%, a decrease of 0.24 pct over the previous year; the management rate was 6.12%, a decrease of 0.15 pct over the previous year; the financial rate was -1.77%, a decrease of 1.36 pct over the previous year, mainly due to exchange gains and losses; and the R&D fee rate was 5.10%, a decrease of 1.45 pct from the previous year.
The company's production capacity continues to increase, and the operating conditions of Liyuan still need to be improved: in 2022, the company's fund-raising project “Technological Improvement Project for Adding 34,800 Sets of High-Precision Machinery Parts a Year” was launched. By the end of 2022, the company had an annual production capacity of 70,000 tons. At the same time, the construction of the company's “high-precision mechanical parts production and construction project” is progressing smoothly. After the project is put into operation, the scale of production and supply of the company's products will be further expanded. Liyuan Jinhe, a holding subsidiary of the company, had a net loss of 164.06 million yuan in 2022, and the participating company Suzhou Liyuan Hydraulic Co., Ltd. generated a total investment loss of 9.263,500 yuan in 2022.
We expect the company to achieve net profit of 308/413/536 million yuan in 2023-2025. The corresponding PE was 22.5/16.8/12.9 times (2023.03.30), covered for the first time, and gave it an “increase in holdings” rating.
Risk warning: The expansion of new customers into new fields fell short of expectations; overseas economic sentiment declined; the operating conditions of companies and holding companies fell short of expectations.