Event: The company released its 2023 annual report.
Key points of investment
2023 performance surged 45% year on year, mixed reform+internationalization+ product structure optimization, and profitability improved significantly. The company achieved revenue of 27.519 billion yuan, up 4% year on year; net profit after deducting 868 million yuan, up 45% year on year; net profit after deducting non-return to mother of 569 million yuan, up 20% year on year; gross profit margin of 20.8%, up 4.0 pct year on year; net profit margin 3.4%, up 1.0 pct year on year; sales/management/R&D/finance expenses rates were 8.2%/3.0%/3.3%/0.6%, respectively The specific increase is 1.3pct/0.2pct/0.5pct/0.3pct.
Operating efficiency improved markedly after the mixed reform, employee incentives are expected to be further increased, and the product structure continues to be optimized, and the efficiency and profitability of the mixed reform operation have improved markedly. In 2023, the company paid close attention to the precise implementation of the “Three Perfect” strategy, implemented the entire business process with “profit growth, business growth, and capacity growth”, and was guided by a medium- to long-term strategic vision.
The company continues to stimulate the efficiency of the mixed reform mechanism and promote cost reduction and efficiency throughout the value chain. In 2023, the company's ROE (weighted) reached 5.4%, up 1.6 pct year on year; gross margin reached 20.8%, up 4.0 pct year on year; net margin reached 3.4%, up 1.0 pct year on year. At the same time, the company's market value management achieved remarkable results in 2023.
It is planned to repurchase shares for 1-2 billion yuan, and employee incentives are expected to increase. On the evening of March 29, the company announced that it plans to use its own funds to repurchase shares at least RMB 100 million (inclusive) and not more than RMB 200 million (inclusive) through centralized bidding transactions. It is intended to be used for equity incentives or employee stock ownership plans, demonstrating confidence in the company's future development.
The comprehensive internationalization strategy was further advanced, and overseas revenue grew rapidly in 2023. In 2023, the company achieved overseas revenue of 11.46 billion yuan, an increase of 41% over the previous year, accounting for 42% of total revenue. The company focuses on improving asset quality. The gross profit margin and net interest rate of overseas business have all increased dramatically, and receivable turnover and risk inventory have declined further.
The market share of excavators increased rapidly, electric loaders grew rapidly, and comprehensive solutions opened up room for growth: 1) Comprehensive national four strategy: implementation of the comprehensive national four strategy to help increase profitability; 2) excavators: the domestic market share of excavators exceeded 11% in 2023, and the domestic sales growth rate outperformed the industry by more than 20 pcts, and the market share increased by 3 pcts, reaching a record high; 3) Loaders: electric loader sales increased 67% year on year in 2023, leading market share, 41% year-on-year increase; 4) Comprehensive solution: bulldozer, grader Products such as machines and small machines have achieved rapid growth, and sales of non-construction machinery products have achieved new breakthroughs. The company vigorously develops strategic new businesses and growth businesses such as mining machinery, aerial machinery, agricultural machinery, industrial vehicles, etc., to provide new growth points for long-term development. Mining machinery: Quickly expand the coverage of key overseas markets, achieve mass sales in multiple regions, and sales increased significantly over the same period last year. Aerial machinery: Sales revenue increased 112% year on year in 2023, with overseas sales up 123% year on year. Agricultural machinery: Complete batch switching of national four tractor products, set up projects to develop high-end intelligent tractor products; actively explore domestic and foreign agricultural machinery markets, deeply integrate into the RCEP region, and enter international markets such as Australia and Thailand. Industrial vehicles: Revenue and profit increased dramatically. Overseas revenue increased 57% in 2023, accounting for 60% overseas.
Profit forecast and valuation: Net profit due to mother for 2024-2026 is expected to be 1.24 billion, 1.81 billion yuan, and 2.66 billion yuan, up 43%, 46% year-on-year (CAGR 2024-2026 is 46%), corresponding to PE 13, 9, and 6 times.
The current price corresponds to the 24-year PB valuation of 0.9x (2024/3/29), which is lower than the industry average. Maintain a “buy” rating.
Risk warning: Investment in infrastructure and real estate falls short of expectations; exports fall short of expectations; prices of raw materials fluctuate; industry competition heightens risks.