Core views:
Formulate a plan for double improvement in quality return. The company issued the “Notice on the Action Plan for Double Improvement of Quality and Return”. The core initiatives include five aspects. (1) Strengthen dominant businesses, accelerate the development of emerging momentum, and expand overseas markets in depth: The company emphasizes emerging products and breakthroughs in overseas markets.
According to the above announcement, the company achieved overseas revenue of 13.03 billion yuan in the first three quarters of '23, an increase of 100.5% over the previous year, and the share of overseas revenue increased to 36.7%. (2) Adhere to scientific and technological innovation and high-intensity R&D investment to lead high-quality development: The company has developed and applied nearly 500 new technologies in the past three years, the conversion rate of scientific and technological achievements has exceeded 97%, and it has won the National Science and Technology Progress Award twice. By the end of '23, the company had applied for a total of 6,753 invention patents, ranking first in the machinery industry in the number of effective invention patents.
(3) Continuously improve total factor productivity and enable intelligent manufacturing upgrades: 10 smart factories, including the Zhonglian Smart Industrial City Earthmoving Machinery Park, Aerial Work Machinery Park, pumping park, material center, intelligent tower crane factory, smart mixer factory, and smart hydraulic valve factory, have been built and put into operation, achieving a significant increase in the overall automation rate of production lines, and the entire production process is green, energy efficient and environmentally friendly. (4) Pay attention to investor relationship management and improve the quality of credit disclosure: In the future, the company will further establish and improve a three-dimensional investor relationship management system to enable the company's investor relationship management work in a comprehensive and three-dimensional manner. (5) Excellent cash dividends and share repurchase policies to share development results with all shareholders: the company's cumulative repurchase amount is nearly 4.8 billion yuan in the past 5 years. In the future, it will continue to coordinate the dynamic balance between the company's development, performance growth and shareholder returns to achieve a “long-term, stable and sustainable” return mechanism.
Profit forecasting and investment advice. The company's EPS is expected to be 0.40/0.54/0.69 yuan/share in 23-25. The company is a leading domestic construction machinery company. Considering the company's high export growth rate and marginal upward trend, growth in the new sector of earthwork and high-tech machinery can be expected. Referring to comparable company valuations, the company was given 16 times PE in 2024, with a reasonable value of 8.67 yuan/share. Considering the premium situation and exchange rate situation of A/H shares, the reasonable value of H shares is HK$5.56 per share, giving A/H shares a “buy” rating.
Risk warning. Competition in the industry is intensifying, and there is a risk that the price war will not be mitigated; the risk that overseas market expansion will fall short of expectations; the risk that the domestic market recovery will fall short of expectations.