2022 results are in line with market expectations
Haitian International announced its 2022 results: realized revenue of 12.308 billion yuan, a decrease of 23.2% over the previous year; Guimu's net profit was 2,225 million yuan, a decrease of 25.8%; looking at 2H22, revenue was 5.799 billion yuan, a decrease of 25.6% over the previous year; and Guimo's net profit was 1,092 million yuan, a decrease of 25.6% over the previous year. Affected by the downturn in the injection molding machine cycle in 2022, revenue and profit declined year-on-year, in line with market expectations.
Development trends
The decline overseas is less than that at home, and demand for two-board aircraft is quite buoyant. By market: 1) 2H22 domestic revenue fell 31.0%/12.0% year-on-year, respectively, and overseas revenue fell 13.6%/9.0% yoy/month respectively. Overall, the overseas decline was less than domestic. We estimate that demand in North America was better. Among them, demand in North America was better. Europe/Southeast Asia was affected by factors such as geopolitical conflicts and inflation, and revenue declined year-on-year. By product, the revenue of the Mars Energy-saving Injection Moulding Machine/Changfeiya Electric Series/Jupiter Two-Board Machine 2H22 changed -36%/-9%/+14%, respectively. Demand for small machines is under pressure, and demand for two-board machines continues to be booming.
The effects of declining raw material costs are gradually showing, and profitability has been restored month-on-month. The company's gross margins and net profit margins in 2022 were 31.8%/18.4%, down 0.4ppt/0.7ppt respectively from the previous year. Among them, 2H22 gross margins and net margins were 33.1%/18.8%, up 0.4ppt/0.8ppt respectively from 1H22, mainly benefiting from lower raw material prices, offsetting the impact of insufficient capacity utilization.
Looking ahead to 2023, the boom in big machines is strong and demand for small machines is expected to pick up marginally. According to our research, we expect that from September last year, with the impact of the epidemic and the gradual weakening of base pressure, the SME downturn cycle has gradually bottomed out, and new orders are expected to show a year-on-year increase trend; demand for large machines driven by the expansion of production of injection molded parts related to new energy vehicles is expected to continue. Furthermore, we expect gross margin to recover upward this year as prices of upstream raw materials such as steel decline.
The acceleration of overseas investment is expected to contribute to medium- to long-term growth momentum. The company's capital expenditure in 2022 was 1,456 billion yuan, an increase of 72% over the previous year. We judge that it was mainly due to the acceleration of overseas investment and construction. The company purchased land in Serbia and Malaysia in 2022. Furthermore, production capacity in India and Mexico continued to climb. In the construction of the new plant in Chennai, India, we are optimistic that the company will achieve a double increase in overseas share and share of overseas revenue as overseas manufacturing and sales layouts improve.
Profit forecasting and valuation
The current demand for injection molding machines has bottomed out, but it is reflected in the fact that it will take time for revenue. We lowered our 2023 profit forecast by 10.5% to 2,666 billion yuan, and introduced the 2024 profit forecast to 3.483 billion yuan. The company's current stock price corresponds to 11.3x/8.4x 2023/24e P/E. Considering the increase in the valuation center of comparable companies, the target price of HK$23.54 remained unchanged. Corresponding to the 2023/2024 target P/E was 11.9x/8.8x, with room for an increase of 5.8%, maintaining an outperforming industry rating.
risks
Market demand for injection molding machines fell short of expectations, and prices of raw materials and sea freight increased.