Core viewpoints

In the first three quarters of 2023, the company achieved a cumulative operating income of 2.014 billion yuan, a decrease of 16.01% over the same period last year, and a net profit of 125 million yuan, a decrease of 47.19% over the same period last year. 23Q3 achieved an operating income of 649 million yuan in a single quarter, a decrease of 17.88 percent over the same period last year, and a net profit of 28 million yuan, down 59.45 percent from the same period last year. The decline in the company's Q3 operating income compared with the same period last year is mainly due to the intensification of market competition and the decline in the business income of sanitation equipment; in addition, the decline in performance is also affected by the increase in impairment losses on sanitation services assets. With the continuous deepening of new energy in the public domain, the company is expected to continue to expand market share by virtue of manufacturing and brand advantages. We expect the company to achieve a net profit of 242 million yuan, 270 million yuan and 315 million yuan respectively from 2023 to 2025, which will be lowered to the "overweight" rating.

Event

The company releases its third quarterly report for 2023

Yutong heavy Industry reported in the third quarter of 2023 that the company achieved a cumulative operating income of 2.014 billion yuan in the first three quarters of 2023, a decrease of 16.01% over the same period last year, and a net profit of 125 million yuan, a decrease of 47.19% over the same period last year. The weighted average ROE is 5.01%, and the basic EPS is 0.23 yuan per share. The company's 2023 Q3 achieved operating income of 649 million yuan in a single quarter, a decrease of 17.88% over the same period last year, and a net profit of 28 million yuan, down 59.45% from the same period last year.

Brief comment

Intensified competition in the industry dragged down performance, maintaining the leading position of new energy sanitation equipment. In the first three quarters of 2023, the company achieved revenue of 2.014 billion yuan, a decrease of 16.01% over the same period last year, and a net profit of 125 million yuan, down 47.19% from the same period last year. In terms of Q3 alone, the company achieved an operating income of 649 million yuan, a decrease of 17.88% over the same period last year, and a net profit of 28 million yuan, a decrease of 59.45% over the same period last year. The decline in the company's Q3 operating income compared with the same period last year is mainly due to the intensification of market competition and the decline in the business income of sanitation equipment; in addition, the decline in performance is also affected by the increase in impairment losses on sanitation services assets. The company's gross profit margin in the first three quarters was 23.38%, down 3.49 percentage points from the same period last year. The decline in the company's gross profit margin was mainly affected by increased market competition. The demand for sanitation equipment in the company's main business is greatly affected by the government budget. According to insurance data from the Banco Insurance Regulatory Commission, total sales of sanitation vehicles in China fell by 8.9% from January to September 2023 compared with the same period last year, of which new energy sanitation vehicles were + 23.3% year on year. The company continues to work hard in the field of new energy sanitation, selling 856 new energy sanitation vehicles in the first three quarters of 2023, down 10.7% from the same period last year, ranking second in the industry.

During this period, the cost control is reasonable, and the room for growth is expected to open gradually.

The company's expense rate in the first three quarters of 2023 was 18.68%, up 0.57% from the same period last year; the sales expense rate, management expense rate, and R & D expense rate were 10.57%, 3.47% and 5.51%, respectively, up 0.37%, down 0.13%, and 0.14% respectively over the same period last year. Although the overall industry demand of 23Q3 has weakened, the company's sales of new energy sanitation equipment have increased month-on-month. With the continuous deepening of new energy in the public domain, the company is expected to continue to expand market share by virtue of manufacturing and brand advantages. We expect the company to achieve operating income of 3.141 billion yuan, 3.412 billion yuan and 3.899 billion yuan respectively from 2023 to 2025, with a net profit of 242 million yuan, 270 million yuan and 315 million yuan respectively, corresponding to an EPS of 0.44 yuan per share, 0.5 yuan per share and 0.58 yuan per share, downgraded to "overweight" rating.

Risk analysis.

Government payment risk: if the government financial funds remain tight, the company's sanitation equipment sales business may grow faster than expected, and the cash situation of the company's sanitation services may deteriorate, thus affecting the company's operating performance.

Market competition risk: at present, the market concentration of sanitation services is low, if the market competition is further intensified, the revenue and profit level of sanitation services will decline, which will affect the company's operating performance.

The real estate market continues to deteriorate: the company's construction machinery business has a strong correlation with the real estate industry. If the demand of the real estate industry is delayed, the company's construction machinery business revenue may continue to decline.