Description of the event
Yutong Heavy Industries achieved operating income of 627 million yuan in Q1 2023, a year-on-year decrease of 15.22%, net profit of 29 million yuan, a year-on-year decrease of 65.50%, after deducting net profit of 25 million yuan from non-Gumo, a year-on-year decrease of 49.34%.
Incident comments
The sanitation equipment industry has yet to improve, and gross margin has declined due to increased competition. According to the insurance data of the sanitation equipment industry, from January to February 2023, a total of 9,901 were covered by insurance, down 16.0% from the previous year. Mainly due to government finance, procurement demand has not improved. The 2023Q1 national general public budget expenditure on energy saving and environmental protection was 126.3 billion yuan, down 2.4% from the previous year, leading to a clear decline in the company's Q1 sanitation equipment product volume. The market share of Yutong sanitation equipment fell 0.6pct to 4.1% from 4.7% for the full year of 2022 (cumulative total for 2021-February, same below). Among them, the amount of new energy sanitation equipment backup was 126.3 billion yuan in the 2023Q1 national public budget expenditure, a decrease of 2.4% over the previous year, leading to a clear decline in the company's Q1 sanitation equipment product volume. 28.7% for the full year of 2022 fell to 14.3%, indicating that competition in the industry has intensified since the beginning of the year. The comprehensive gross margin of 2023q1 companies fell 5.64 pCT to 23.93%. In particular, the larger decline in new energy equipment exacerbated the decline in performance.
Expense control has been effective, and other benefits such as government subsidies have declined markedly. The company's anticipated expense ratio in 2023Q1 was 16.73%, down 3.01 pct from the previous year. Among them, the sales expenses ratio fell 1.07pct to 9.69%, and the management and R&D expenses ratio fell 0.21pct to 9.38%. The main reason was that equity incentive expenses declined and the financial expenses ratio fell 1.73 pct to -2.34%. Cash flow was normal. The company's 2023Q1 revenue ratio was 129%, compared to 101% in the same period last year, mainly due to higher revenue in 202Q4, a portion of Q1 payments, and a decline in Q1 revenue; the net present ratio was 165%. The same period last year was negative, mainly due to a decrease in purchase payments made in the current period, cash payments to employees, etc.
Long-term optimism about the company's competitive advantage will drive performance growth. Yutong is one of the few enterprises in the industry with integrated chassis and upper mount manufacturing capabilities. Product manufacturing has a certain cost advantage. The company's cost control capabilities are relatively strong against the backdrop of a sharp rise in raw material prices. Its own chassis can also customize differentiated products to meet the differentiated needs of sanitation service companies. Furthermore, the company's sales network continues to expand, and the increase in brand awareness has also led to increased sales. Moreover, the construction machinery business is also expected to pick up after the epidemic. The economy of electric mining cards highlights continued growth, and we are optimistic that the company's medium- to long-term performance will improve.
The pilot policy for new energy sanitation equipment is about to be implemented, and cutting demand for energy equipment may reach an inflection point. On January 30, 2023, eight departments including the Ministry of Industry and Information Technology issued the “Notice on Organizing and Carrying Out Pilot Work for Comprehensive Electrification of Vehicles in Public Leading Cities”, which proposed “initiating pilot work for comprehensive electrification of vehicles in the public sector nationwide”, requiring that the proportion of new and new energy vehicles added and updated in the pilot field to reach 80% of new and new energy vehicles. It is also likely that CCER will solve the problem of high prices of new energy vehicles. It is expected that after the implementation of the pilot policy, new energy sanitation vehicles will implement the industry's expansion logic, which will also drive the company's performance improvement. Looking at it now, although the penetration rate of new energy equipment is only around 6%, the future growth of new energy sanitation equipment is quite elastic.
It is estimated that a total of 35,176 million yuan of equity incentive expenses will be amortized in 2023. The company's net profit for 2023-2025 is estimated to be 420 million yuan, 550 million yuan, and 760 million yuan respectively. Corresponding to PE 15x, 12x, and 8x, maintaining the “increase in holdings” ratings and risk alerts
1. Risk of deterioration in the cash flow of sanitation services;
2. The competitive pattern for new energy equipment has deteriorated.