Yituo Co., Ltd. released its 2023 annual report: in 2023, the company achieved operating income of 11.534 billion yuan (-8.20%); net profit attributable to mother of 997 million yuan (+46.39% year over year); net profit after deducting non-return to mother of 926 million yuan (+20.02% year over year).
Key points of investment
With policy support, the industry is expected to recover
In 2024, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which proposes to promote the upgrading of equipment in key industries, support the renewal of transportation equipment and old agricultural machinery; continue to implement agricultural machinery scrapping and renewal subsidy policies, promote the scrapping and renewal of old agricultural machinery, and accelerate the restructuring of agricultural machinery. Overall, market cyclicality and product structure are intertwined. After the policy is implemented, high-quality domestic four products are steadily driving the market out of the inflection point of the cycle. We expect the agricultural machinery market to experience restorative growth in 2024 as demand continues to be released and favorable factors increase, and the company, as a leader in the tractor industry, is expected to benefit first.
Seizing the opportunity to switch from China 4, the company's market competitiveness continued to improve in 2023. Affected by multiple factors such as moving demand and rising machine purchase prices due to the upgrade of the national 4 emission standards, overall demand in the domestic agricultural machinery industry declined. At the same time, the upgrading of emission standards also accelerated the pace of the industry's transformation to green, intelligent, and high-end. The company seizes the first-mover opportunity for the four national products to be launched, gives full play to its advantages in technology, products, large-scale production, services, channels, etc., and quickly seizes the market. The company sold 72,300 units of large and medium towing products in 2023, and its market share continued to lead the industry. In terms of international market development, the company continued to cultivate key export regions such as Russian-speaking regions and South America, and the overseas market layout continued to expand, and export sales of tractor products increased 43% year-on-year throughout the year.
Asset structure optimization, the company focuses on tractor business development
In 2023, the company sold the financial business of its subsidiaries, delayed the restructuring of the finance company, gradually ceased the financial business, and recovered large amounts of funds such as loans. As a result, net cash flow from operating activities decreased by 2,546 billion yuan compared to the same period in 2022, which affected the company's operating income to a certain extent. Furthermore, after the implementation of the national four emission standards for non-road machinery, there was a clear trend in the tractor power segment. Changes in the tractor product structure were beneficial to the company's sales of medium and large towing products. The gross profit of the company's agricultural machinery business in 2023 was 14.5%, an increase of 0.45 pct over the previous year.
Profit forecasting
The company's revenue for 2024-2026 is estimated to be 127.79, 143.77, and 16.070 billion yuan, respectively, and EPS is 1.03, 1.18, and 1.35 yuan, respectively. The PE corresponding to the current stock price is 15, 13, and 12 times, respectively. The company is the absolute leader in domestic tractors. Benefiting from national policy requirements such as food security, agricultural machinery equipment safety, agricultural machinery equipment renewal, etc., and compounding the company's product upgrades, the tractor market share is expected to increase further. First coverage, giving a “buy” investment rating.
Risk warning
Macroeconomic sentiment falls short of expectations, agricultural machinery subsidy policies fall short of expectations, market competition intensifies, gross margin is under pressure, new product expansion falls short of expectations, etc.