Incident: The company released its annual report and achieved revenue of 47.075 billion yuan in 2023, up 13.08% year on year; net profit to mother was 3.506 billion yuan, up 52.04% year on year, which is the median value of the previous performance forecast. The company plans to distribute a cash dividend of 3.20 yuan (tax included) for 10 shares. The total dividend amount exceeds 2.7 billion yuan, and the dividend rate is as high as 80%. According to the current stock price, the dividend rate reaches 4%. The dividend exceeds market expectations.
Key points of investment
The 2023 performance surged 52% year on year, and exports grew rapidly. The alpha attribute of the industry highlights the steady rise in the market position of the company's traditional dominant sector, and the continuous rise in competitiveness in overseas markets, highlighting the alpha attributes of the industry: (1) By product: in 2023, the company's concrete machinery achieved revenue of 8.6 billion yuan, an increase of 1.6% year on year; the market share of traditional dominant products concrete machinery, construction lifting machinery, and construction hoisting machinery rose steadily. Among them, the market share of concrete mechanical long boom pumps and mixing plants is still rising. It steadily ranks first in the industry, and maintains second place in the industry in the market share of mixers. Revenue from emerging strategic earthmoving machinery was 6.65 billion yuan, up 89.3% year on year, and high altitude machinery was 5.71 billion yuan, up 24.2% year on year. The growth rate was significantly higher than that of the industry. (2) Looking at regions: In 2023, the company's domestic revenue was 29.170 billion yuan, down 7.81% year on year, and overseas revenue was 17.905 billion yuan, up 79.2% year on year, and the share of overseas revenue increased further to 38%.
Extreme cost reduction and overseas business promotion. Profitability continued the upward trend. In 2023, the company's gross sales margin and net interest rate were 27.54% and 8.01% respectively, up 5.7 pct and 2.31 pct year-on-year. At home and abroad, the gross margin of the company's domestic and overseas business in 2023 was 24.7% and 32.2% respectively, and the gross margin of overseas business was 7.5 percentage points higher than domestic gross margin. On the cost side, the company's sales/management/R&D/finance expense ratios were 7.6%/4.0%/7.3%/-0.6%, respectively, with a year-on-year change of 1.3/0.2/1.3/0pct.
By the end of 2023, the company had built and put into operation a total of 11 smart factories, and is speeding up the construction of 8 smart factories, including construction machinery, infrastructure construction machinery, truck-mounted cranes, engineering axles, and high-end hydraulic cylinders.
Furthermore, through a number of measures such as strengthening the supply chain system, improving the self-control rate of core components, speeding up domestic substitution, and applying new materials, new processes, and technology, the company's ultimate cost boosts profitability improvement.
High dividends focus on investor returns, and long-term investment value is highlighted
The company plans to distribute a cash dividend of 3.20 yuan (tax included) for 10 shares. The total dividend amount exceeds 2.7 billion yuan, and the dividend rate is as high as 80%. According to the current stock price dividend rate, it will reach 4%, and the dividend exceeds market expectations.
The company's cumulative cash dividends in the past three years have exceeded 8.3 billion yuan, accounting for 52% of the company's net profit for the same period. The dividend ratio has long been at the leading level in the industry. The total repurchase amount of the company in the past 5 years is nearly 4.8 billion yuan, and great importance is attached to shareholder returns. Looking ahead, the company has basically no large capital expenditure. As the domestic industry cycle recovers and stabilizes, the company's performance and cash flow are expected to grow steadily. Combined with the company's tradition of high dividend rates, it is expected to bring continuous and stable dividend returns, and long-term investment value is prominent.
Construction machinery: The March peak season data exceeded expectations, and the update cycle is getting closer
CME estimates that excavator sales in March were around 25,000 units, down 2% year on year. Its sales volume in China was 15,000 units, up 6.5% year on year, and the peak season was corrected. As the base weakens beginning in April, the industry's growth rate is expected to be low and high. From an industry perspective, in terms of the renewal cycle, the construction machinery industry ushered in a new round of renewal in the second half of '24. A series of large-scale equipment renewal policies boosted the market recovery, and the industry beta rose marginally. The industry is currently at the bottom of history, with strong marginal upward elasticity. Domestic sales of excavators in '23 were only 90,000 units, far lower than the average annual renewal demand center of 15-20 million units. Under the cyclical flexibility+scale effect of the industry, it is expected that valuations will be rapidly absorbed and profits will grow nonlinearly.
Profit forecast and investment rating: Optimistic that emerging sectors such as excavators, high machinery, and high-end agricultural machinery will continue to grow and expand the company's performance and valuation flexibility globally. We expect the company's 2024-2026 net profit of 45 (maintenance) /56 (maintenance) /6.9 billion yuan. The current market value corresponds to PE 15/12/10 times, respectively, maintaining a “buy” rating.
Risk warning: Fluctuating industry cycles, global expansion falling short of expectations, international trade frictions.