The Zhitong Finance App learned that Huacheng Securities published a research report stating that for the first time, it covered the “push” rating given to Yutong Heavy Industries (600817.SH), with a target price of 13.56 yuan for 2023. The bank expects net profit from the company to parent in 2023-2025 to be 415 million, 472 and 554 million yuan respectively, corresponding to PE of 14/13/11 times. Using the segmentation method for valuation, the sanitation equipment business selected Yingfeng Environment and Fulongma as comparable companies. Combined with the company's market position and revenue structure, the business should enjoy a certain valuation premium, so it gave 20 times the 2023 target PE; in the sanitation service business, it gave 13 times PE to the target of Overseas Chinese Bank Co., Ltd. and Yuhetian; in the construction machinery part, the bank chose Sany Heavy Industries, etc. as comparable companies, considering that traditional construction machinery companies are not the core business, so 10 times PE is given. Assuming that each business segment accounts for the same share of net profit as gross profit, the company is given a target price of 13.56 yuan for 2023.
The main views of Huacheng Securities are as follows:
A leading new energy sanitation equipment company backed by Yutong Group.
Established in 2001, Yutong Heavy Industries is one of the core companies under the Yutong Group. It entered the capital market behind closed doors in 2020. Its main business covers the four major sectors of sanitation equipment, sanitation services, construction machinery and mining equipment. Among them, sanitation equipment is the company's largest business. In recent years, the company has been deeply involved in the segmentation of new energy sanitation equipment, adheres to the development strategy of “comprehensive market development, comprehensive customer development, comprehensive product layout, and comprehensive channel expansion” to improve product competitiveness, and has taken advantage of the differentiated competitive advantage of “chassis+top”. The cumulative market share ranking first in the industry in 2020-2022.
The increase in the mechanization rate of sanitation has led to a steady increase in demand for traditional equipment, and strong policy beta has promoted an increase in the penetration rate of new energy sanitation equipment.
1) In terms of traditional sanitation equipment, the mechanized cleaning rate of China's cities and counties in 2021 is less than 80%, and there is still a gap with the 90% mechanization rate of developed countries. According to the bank's estimates, under the assumption that the mechanization rate in 2027 is 85%, China's road cleaning equipment market is expected to reach 185.74 billion yuan, adding 26.65 billion yuan in market space; 2) In terms of new energy sanitation equipment, the “Notice on Organizing Pilot Work on Comprehensive Vehicle Electrification Zones in the Public Sector” proposed a pilot regional public sector in February 2023 The penetration rate of new energy vehicles added to new vehicles reached 80%, while the penetration rate of new energy sanitation vehicles added in 2022 was less than 6%. According to the bank's estimates, the market space for new energy sanitation equipment in China may exceed 26.56 billion yuan in 2023-2025 under a neutral scenario. As a leading enterprise in the field of new energy sanitation equipment, the company is expected to achieve considerable performance and stock price flexibility against the backdrop of a rapid increase in penetration rate.
The Group's empowerment+R&D advantages create a broad moat of products.
The company is empowered by Yutong Group on the manufacturing side, channel side, and brand side, and has advantages in manufacturing, raw material procurement and market expansion; the company has integrated chassis installation technology, which increases vehicle download weight by about 10%, significantly reducing usage costs. In 2022, the gross profit margin of the company's sanitation equipment was 32.3%, which is higher than the industry average; in addition, the company continues to invest in R&D, and the R&D cost rate in 2022 reached 4.46%, higher than rival Yingfeng Environment/Fulongma's 2.27%/1.13%.
Sanitation services are being carried out lightly, and new energy mining equipment has risen to prominence.
Sanitation services: Due to the impact of the epidemic, the financial pressure on local governments is high, which has dragged down the speed of repayment of sanitation service projects. In 2022, the company has accumulated accounts receivable of close to 1 billion yuan on the company's books. In order to strengthen risk management and control, the company has voluntarily withdrawn from some projects with poor repayment, with an annualized amount of 8.2 billion yuan for ongoing projects at the end of 2022. Mining equipment: Although the traditional construction machinery business is affected by the real estate cycle, demand for new energy mining equipment is growing rapidly in the context of the normalization of “green mines” and “smart mines” construction. In 2022, the company achieved operating income of 671 million yuan (yoy +123.1%), which is expected to become an important driving force for the company's growth in the future.
Risk warning:Policy progress fell short of expectations, market competition intensified, and accounts receivable payments fell short of expectations.