Event: The company issued a pre-announcement of the 2023 annual results increase.
Key points of investment
The 2023 results are expected to increase 47% to 57% year on year, and the profit growth rate for the fourth quarter is expected to increase significantly. The company's net profit due to mother is 3.38 billion yuan to 3.62 billion yuan, up 47% to 57% year on year, after deducting non-net profit of 2.27 billion yuan to 2.42 billion yuan, up 76% to 87% year on year. Based on this, net profit due to mother for the fourth quarter is expected to be 520 million yuan to 760 million yuan, an increase of 282% to 457% year on year. The high annual performance mainly benefits from 1) the company deepened its “end-to-end”, “digital” and “localized” overseas business system, and overseas R&D and manufacturing bases expanded and upgraded, and overseas market expansion achieved remarkable results; 2) the company's emerging business sectors such as excavators, high machinery, and mining machinery grew rapidly; 3) the gradual commissioning of smart industrial cities to improve manufacturing efficiency, end-to-end transformation, digital applications, and improvements in the self-control rate of key components to improve operating efficiency.
Product structure advantages: Demand for core products, automobiles and tower cranes, is expected to stabilize. According to the Construction Machinery Industry Association, the truck crane industry sold 1,314 units in December, down 21.9% year on year. Under marginal pressure, sales volume from January to December was 24077 units, down 7% year on year. The tower crane industry sold 1,015 units in December, down 24% year on year. The decline narrowed significantly. Sales volume in January-December was 18,282 units, down 13% year on year. Demand in the automobile and tower crane industry is expected to gradually stabilize, and overall performance is significantly superior to excavators. In 2022, the company's revenue from cranes, concrete machinery, and earthmoving machinery accounted for 46%, 20%, and 8%. The product market share was further strengthened, and it was less affected by the decline in demand in the excavator industry. Excavators and high machinery are all emerging business segments of the company. In the first half of the year, CIDA's domestic market share doubled year on year, and overseas revenue increased 174% year over year. High-tech has the largest market share of domestic small and medium-sized customers. With the construction and commissioning of the Mexican plant, the overseas market of Hi-Tech is expected to expand rapidly.
Overseas market location advantage: Demand from the Middle East and Russian regions is expected to continue to be strong, supporting high export growth. 2023H1's overseas revenue will increase by 115%, and achieve explosive growth. It accounted for 35% of total revenue, increased by 17pct, and overseas business grew strongly. Key countries such as the United Arab Emirates, Saudi Arabia, Turkey, Russia, Kazakhstan, and Brazil achieved remarkable results, and sales performance increased by more than 200% year on year. The company's main export revenue comes from regions such as the Middle East and Russian-speaking regions. Internationalization is expected to continue to break through. Oil-producing countries such as Turkey, Saudi Arabia, and the United Arab Emirates are promoting infrastructure, and demand is growing rapidly, and sustainability is good. Construction machinery has become the brand with the highest market share in the Middle East and Russian-speaking regions, and its products maintain the top position in the Turkish, Indian and Korean markets. As the layout of the European, African, and Latin American markets, including Australia, progresses, it is expected to continue to support the company's high export growth.
The construction machinery industry is gradually bottoming out, and there is a trilogy of recovery: the start of the renewal cycle, improvement in domestic demand, and steady export renewal: domestic estimates are based on the 8-9th year of excavators as the peak renewal period, and it is expected that 2024 will begin a new renewal cycle. Domestic demand: As real estate and infrastructure policies continue to be favorable, the operating rate is expected to rise, and domestic demand will gradually improve. Exports: Overseas market share continues to rise, and China's leaders are gradually becoming global leaders. In 2023, China's cumulative export value of construction machinery (in RMB) was 341.405 billion yuan, an increase of 16% over the previous year.
Profit forecast: Net profit from 2023 to 2025 is expected to be 3.5 billion, 4.5 billion yuan, and 6 billion yuan, an increase of 52%, 29%, and 33% over the previous year. PE is 18, 14, and 10 times, maintaining the purchase rating.
Risk warning: 1) Infrastructure investment and housing commencement fell short of expectations; 2) Exports fell short of expectations