Incident: On January 25, 2024, the company released its 2023 performance forecast. Operating performance is expected to rise, with net profit attributable to mother between 3.38 billion yuan and 3.62 billion yuan, +46.57% to +56.98%; net profit after deduction is approximately 2.27 billion yuan to 2.42 billion yuan, +75.59% to +87.20% year-on-year.
On March 1, 2024, in order to activate the capital market, enhance the quality and investment value of listed companies, effectively guarantee the interests of all shareholders of the company, and enhance investor confidence, the company issued an announcement on the “Double Improvement of Quality and Return” action plan. The plan mainly proposes: 1) continue to adhere to the main business advantages and expand overseas markets; 2) adhere to scientific and technological innovation and high-intensity R&D; 3) continuously improve the company's productivity and enable green development; 4) strengthen the efficiency and quality of information communication with investors; 5) reward investors with excellent cash dividends and share repurchase policies to support the healthy development of the capital market.
The company insists on deepening the overseas business system, and its competitiveness in the global market continues to improve. The company proposed in its action plan to expand overseas markets in depth. The 2023 performance forecast shows that the reasons for the sharp increase in operating profit for the whole year include significant results in expanding overseas markets. The company fully implements the 2022 annual report's vision to accelerate the development of overseas markets, continues to deepen the “end-to-end”, “digital” and “localized” overseas business system, and continues to accelerate the expansion and upgrading of overseas R&D and manufacturing bases. The company's sales network, service quality, brand awareness, and user reputation are continuously improving on a global scale. According to the action plan, in the first three quarters of 2023, the company's overseas revenue was 13.029 billion yuan, +100.53% year-on-year, and the share of overseas revenue increased to 36.69%, setting a record high. Overseas business achieved key breakthroughs in the market, and construction hoisting machinery became the brand with the highest market share in the Middle East and Russian-speaking regions; it maintained the number one position in the Turkish, Indian and Korean markets.
The company's new energy products were successfully delivered, adding further impetus to the transformation and upgrading of the industry. On February 28, 2024, 120 Zhonglian Heavy Industries “Ling Guan” series new energy mixers were solemnly delivered to Hunan Suxun Logistics Co., Ltd. in Changsha. The company responded to the national new energy policy and implemented the concept of green development, produced and successfully delivered new products with lower energy consumption, stronger power, longer life, and faster charging. Once launched, the company won a strong reputation. Renewable energy is one of the main directions of the company's product transformation and upgrading. The company has launched more than 170 new energy products, and will continue to help the country's “dual carbon” goals with its high R&D capabilities in the future.
The machinery industry is sluggish in 2023, the industry is slowly improving, and opportunities and challenges coexist in 2024. Construction machinery in China's machinery industry is still sluggish in 2023. According to the China Machinery Industry Federation's overview of the economic operation of the machinery industry in 2023, sales of excavators and loaders in China fell 25.4% and 15.8% respectively in that year. The revenue of the construction machinery industry fell by more than 10% to 13.1%. Looking at monthly data, data from the National Bureau of Statistics shows that in December 2023, China's excavator production was 21,867 units, -3.89% YoY, +16.66%; sales volume was 16,698 units, -1.01% YoY, +11.89% month-on-month, and the month-on-month improvement phase is in the process of improvement. The Construction Machinery Industry Association predicts that in 2024, the overall recovery of China's economy will improve. Strong macroeconomic policies, further substantial construction of key projects, and continued development of science and technology will all provide more opportunities for the development of the machinery industry.
Investment advice. The company continues to lead the market position for its main products. Emerging business segments are growing rapidly, brand market competitiveness continues to increase, and the global strategy is being promoted in depth to promote China's high-quality production capacity to the world market. The future market space is broad, and the “buy” rating is maintained. We expect the company's net profit to be 3.501 billion yuan, 4.482 billion yuan, and 5.492 billion yuan in 2023-2025, EPS of 0.40 yuan, 0.52 yuan, 0.63 yuan, and P/E of 19.8 times, 15.5 times, and 12.6 times, respectively.
Risk warning: There is uncertainty about the international situation and macroeconomic situation; exchange rate fluctuations increase, and there is a risk that earnings from overseas investment and sales will decline; commodity prices such as steel and petroleum rise, and the company's production costs are at risk of rising.