Event: Sany International released its 2023 three-quarter report.
Key points of investment
The performance of the first three quarters increased sharply. The net profit growth rate of the third quarter of the year alone further increased. In the first three quarters of 2023, the company achieved operating income of 15.837 billion yuan, a year-on-year increase of 36.5%, and realized net profit of 1,772 billion yuan, an increase of 36.7% over the previous year. The sharp increase in performance was mainly due to the relatively stable growth rate of major products in the domestic market, the continuous increase in the penetration rate of intelligent and electrified products in overseas markets, and the increased contribution of the consolidated oil and gas equipment division and the emerging industry equipment division; the third quarter achieved operating income of 4.998 billion yuan, an increase of 25.9% over the previous year. The net profit of Guimu was 570 million yuan, an increase of 45.9% over the previous year. The revenue growth rate slowed slightly, but the growth rate of Huimu's net profit increased further.
Increased profitability: The share of overseas revenue increased significantly. Larger, intelligent and electrification continued to penetrate the first three quarters of 2023. The company achieved a gross profit margin of 27.2%, a year-on-year increase of 3.9 pct, a net profit margin of 10.9%, a year-on-year decline of 0.2 pct; a net profit margin of 29.5%, a year-on-year increase of 7.4pct, a net profit margin of 10.9% and a year-on-year increase of 1.3 pct in the first three quarters of 2023. The increase in profitability is due to the significant increase in the share of overseas revenue, the increase in the share of sales of high-margin products such as high-tonnage mining cards, intelligent port machinery, and electrification products, the combined reduction in shipping costs to ease the pressure on the cost side, and the company's continued cost reduction and control.
International expansion: Mining equipment and logistics equipment are progressing steadily overseas. The internationalization of oil and gas equipment is expected to accelerate the company's overseas mining equipment revenue in the first half of the year to 1.48 billion yuan, an increase of 53.4% over the previous year, and the share of revenue in this business increased from 17.6% to 20.5%. With the iterative upgrading of product carrying capacity and the further improvement of the overseas sales network layout, the company's mining equipment is expected to enter the procurement system of more overseas mining enterprises. In the first half of the year, the company's overseas revenue of logistics equipment was 1.77 billion yuan, up 83.3% year on year, and its share of revenue in this business increased from 44.8% to 57.7%. The company's Big Port Machinery continues to receive orders from overseas customers. Xiaogang Machinery has entered the procurement system of four major international operators including APMT. As the production capacity of the Indian factory climbs, additional production capacity guarantees further growth in overseas revenue. In terms of oil and gas equipment, the cooperation between the company and oil service giant Schlumberger in North Asia will help the business go overseas, and the share of overseas revenue from oil and gas equipment is expected to increase rapidly.
Emerging sectors: Development of emerging businesses such as robots, lithium batteries, hydrogen energy equipment, etc., opening up growth space. The company merged into the robot business in 2021, expanded the intelligent production line and AGV business, merged into technology equipment companies at the end of 2022, entered the lithium battery and other new energy equipment markets, and merged into petroleum equipment assets in 2023 to further improve the energy equipment landscape. New businesses continued to provide growth impetus and open up space for future growth.
Profit forecast and valuation: Net profit from 2023-2025 is expected to be 2.21 billion, 2.92 billion, and 3.94 billion yuan, up 33%, 32%, and 35% year on year, corresponding to PE 13 times, 10 times, and 7 times. Give a buy rating.
Risk warning: coal mine volume and price weaken; overseas market development falls short of expectations; new business development falls short of expectations.