Incident: The company released its annual report. In 2023, the company achieved revenue of 11.53 billion yuan, a year-on-year decrease of 8.2%, and achieved net profit of 997 million yuan, an increase of 46.39% over the previous year, and net profit after deducting 925 million yuan, an increase of 20.02% over the previous year. The company's performance was in line with expectations.
The off-season sales plus cost calculation put pressure on Q4 results, and the profit level increased markedly throughout the year. Looking at a single quarter, 23Q4 achieved revenue of 1.28 billion yuan, a year-on-year decrease of 42.85%, and net profit to mother of 88 million yuan, a year-on-year loss reduction of 23.16%. Losses in the fourth quarter were mainly due to cost accounting and the fourth quarter being a low season for agricultural machinery sales. In terms of profitability, the company's gross sales margin reached 15.89% in 2023, up 0.17pct year on year, the net sales margin was 8.58%, up 3.43pct year on year, and the net profit margin improved markedly.
Demand for tractors is affected by the change in national standards and is under pressure in the short term. In 2023, the overall demand for the domestic agricultural machinery industry declined due to multiple factors such as moving forward demand and rising machine purchase prices due to the upgrade of the four national emission standards. The company sold 72,300 large and medium towing products in 2023, and continues to lead the industry in market share. In 2023, the company achieved agricultural machinery revenue of 10.136 billion yuan, a year-on-year decrease of 13%, but gross margin rebounded to 16.58%, an increase of 2.53 pct over the previous year, and the profit level increased markedly. In the short term, demand for tractors is affected by the shift in demand to switch national standards, and is under pressure in the short term, but in the long term, the upgrading of emission standards has also accelerated the pace of the industry's transformation to green, intelligent, and high-end. As a leading tractor company, the company takes the lead in the large and medium tractor market, which is in line with future development trends. It is expected that as the impact of the national standard switch gradually subsides, the company's large and medium sales volume and revenue are expected to gradually pick up.
Overseas markets have continued to make breakthroughs. In terms of international market development, the company continues to be deeply involved in key export regions such as Russian-speaking regions and South America, focusing on adaptability and improvement of new products, improving product certification, optimizing product portfolios, and strengthening service guarantees. The overseas market layout continues to expand. The export sales volume of tractor products increased by 43% year-on-year throughout the year. In 2023, of the company's revenue, domestic revenue was 10.54 billion yuan, down 10.2% year on year, while foreign revenue was 985 million yuan, up 37.3% year on year, and still maintained relatively rapid growth.
Investment advice: We expect the company to achieve net profit of 1.15 billion yuan, 13.4 billion yuan and 16.1 billion yuan in 2024-2026, corresponding PE of 15.08/12.93/10.8 times, respectively. Covered for the first time, giving it a “Recommended” rating.
Risk warning: downstream demand falls short of expectations, risk of food price fluctuations, risk of raw material price fluctuations, increased risk of industry competition