1H23 performance is in line with our expectations
The company announced 23H1 results: revenue of 1.144 billion yuan, an increase of 10.6% over the same period last year; net profit of 164 million yuan, corresponding to earnings per share of 0.20 yuan, an increase of 33.6% over the same period last year. In a single quarter, 2Q23's revenue was 515 million yuan, an increase of 22.8% over the same period last year, and its net profit was 86 million yuan, an increase of 71.6% over the same period last year. The performance is in line with our expectations.
The income of the main business has picked up and the gross profit margin has increased. According to the classification of the income generated by the contract, the income of crushing hammer and hydraulic parts of 1H23 Company is 524 million yuan respectively. According to the statistics of the business unit, the revenue of 1H23 crushing hammer / hydraulic parts increased by 21.56% and 1.18% compared with the same period last year. 1H23/2Q23 's comprehensive gross profit margin increased by 32.3% to 33.4% respectively, mainly due to the downward price of raw materials and the favorable exchange rate.
The expense rate has fallen and the company's profitability has been repaired. The rate of sales / management / R & D expenses of 1H23 decreased by 0.4/0.4/0.4ppt to 4.3%, 4.3%, 4.7%, and the financial expense rate increased by 0.5ppt to 1.4%, mainly due to interest expenses, of which the exchange loss was 1.445 million yuan this year and 2.564 million yuan last year. 1H23/2Q23 's net profit margin increased by 2.5/4.8ppt to 14.3% and 16.7% compared with the same period last year, and its profitability was repaired. The net cash flow of 1H23's operating activities was 24 million yuan, which was 63 million yuan less than the same period last year.
Trend of development
Domestic demand for excavators is under pressure, and exports have maintained rapid growth. According to the National Bureau of Statistics, 1H23 China's investment in fixed assets in infrastructure increased by 10.2% compared with the same period last year, investment in real estate development decreased by 7.9%, and the area of new housing starts decreased by 24.3%. Affected by the decline in real estate construction, 1H23 excavator sales in China decreased by 24.0% compared with the same period last year. Although excavator demand is under short-term pressure, 1H23's domestic / overseas revenue rose by 7.0% to RMB 966 million, respectively.
From the perspective of medium-and long-term space, the localization rate of hydraulic parts in China is expected to improve. The company's current production of hydraulic pumps, walking motors, rotary motors and multi-channel control valves belong to high-end hydraulic parts. 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. We estimate that although the localization rate of oil cylinder is high at present, 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
Maintain the 2023 / 2024 EPS forecast of 0.33 55x/50x 0.36 yuan, and the company's current stock price corresponds to 2023 / 2024. Maintain the target price of 19.49 yuan, corresponding to 2023 59x/53x E 2024, with 8% upside space. Maintain an industry rating that outperforms.
Risk
Sales of excavators fell short of expectations; the volume of new products such as pumps and valves fell short of expectations.