Introduction to this report:
As a leading construction machinery company, the company has a smooth overseas market layout, leading the industry's digitalization and new energy innovation, and is optimistic about the company's overseas growth in 2024, which will drive the release of performance.
Key points of investment:
Investment suggestions: The domestic construction machinery industry continued to bottom out in 2023. The company's performance grew better than the industry. Overseas markets continued to gain strength. The 2023-25 EPS was adjusted to 0.40/0.59/0.72 yuan (originally 0.43/0.56/0.70 yuan), giving the company 14.27 times the 2024 industry average PE, raising the target price to 8.42 yuan, and increasing its holdings.
The performance was in line with expectations. The company announced that it expects to achieve annual net profit of 33.8 to 3.62 billion yuan/year-on-year + 46.6% to 57.0% in 2023. Corresponding to Q4 2023 net profit of $525 to 765 million yuan, compared with 137 million yuan for the same period in 2022, +282.0% to 456.7% year-on-year. The main reasons for the expected increase in the company's performance are: 1) the overseas business system continues to improve, and the international market expansion has achieved remarkable results; 2) the rapid growth of new business segments such as excavators, high machinery, and mining machinery, and the market position continues to improve; 3) the smart industrial city is gradually being put into operation, and the level of production, operation and management is improving.
The domestic policy side has taken a two-pronged approach, and the new order index for the construction industry is improving. At the end of 2023, a trillion-dollar treasury bond project was launched to ease local financial pressure; the real estate side's “construction of the three major projects” accelerated, and it is expected that the construction of the project will maintain a steady start in 2024. In the December 2023 PMI segment, the construction industry PMI expanded significantly. The construction industry's new order PMI reached 50.6% /year on year +2.0pct. The construction industry's forward-looking indicators improved, and we are optimistic that the country will recover in 2024.
The growth rate of construction machinery exports has not abated, and high-value categories are an important breakthrough. According to data from China's General Administration of Customs, construction machinery products were exported at 296.846 billion yuan/ +18.9% from January to October 2023, and domestic enterprises accelerated their overseas expansion. Large-scale mining equipment and electrification equipment with high entry thresholds and high profit margins may be the next incremental breakthrough in export sales. As an industry leader, the company is expected to lead the industry trend.
Risk warning: Demand for cranes and concrete machinery falls short of expectations, and overseas market expansion falls short of expectations.