Zoomlion Heavy Industries released its 2023 annual report: From January to December 2023, the company achieved operating income of 47.075 billion yuan (+13.08%); net profit to mother of 3,506 billion yuan (+52.04% year over year); net profit after deducting non-return to mother of 2,708 billion yuan (+109.51% year over year); gross sales margin of 27.54% (+5.71 pct year over year); and net sales margin of 8.01% (year-on-year +2.28pct).
Key points of investment
The profitability of overseas business increased dramatically. Companies with better cost control had a gross profit margin of 27.54% in 2023, of which the gross margin of the overseas business was 32.23% (+10.21pct year on year) and the gross margin of the domestic business was 24.66% (+2.89pct year on year). The cost rate for the period was 18.36% (+2.86pct year on year), and the revenue growth rate was faster than that of the period cost rate. Among them, the sales expense ratio was 7.56% (+1.23pct year over year), the management expense ratio was 4.04% (+0.26pct year over year), the R&D expense ratio was 7.31% (+1.29pct year over year), and the financial expenses ratio was -0.55% (+0.08pct year over year).
Overseas performance has increased rapidly. Earthmoving machinery and aerial machinery are growing rapidly by region. Overseas market revenue in 2023 was 17.905 billion yuan, up 79.20% year on year. The share of revenue increased from 24.00% in 2022 to 38.04% in 2023. Overseas business grew strongly. Construction hoisting machinery became the brand with the highest market share in Turkey and Central Asia, and continued to explore markets such as Saudi Arabia, Malaysia, Vietnam, and Kenya. Overseas market performance is expected to grow rapidly. By product, the company's earthmoving machinery revenue increased 89.3% year on year, aerial machinery increased 24.16% year on year, and agricultural machinery revenue declined slightly, down 2.17% year on year.
The concentration of construction machinery has increased, agricultural machinery accelerates the transformation of the middle and high-end construction machinery industry, the market concentration of the construction machinery industry has further increased, domestic substitution continues to accelerate, and the volatility of the industry cycle tends to ease. The company's market share of concrete machinery long boom pumps and mixing plants ranks first in the industry, and the market share of construction hoisting machinery remains industry-leading; in the agricultural machinery industry, as the trend of mechanization and full mechanization of crop cultivation continues to develop, middle and high-end agricultural machinery products and smart agriculture will usher in market opportunities. The company's agricultural machinery products achieved full coverage of the main sales models, and dryers and wheat machines remained at the forefront of the domestic market share in 2023.
Profit forecasting
The market position of the company's three traditional dominant industries, concrete machinery, construction hoisting machinery, and construction hoisting machinery, is steadily rising, product competitiveness continues to increase; overseas business continues to expand. The company's revenue for 2024-2026 is 555.50, 650.00, and 74.97 billion yuan, respectively, and EPS is 0.54, 0.69, and 0.82 yuan, respectively. The current stock price is 15, 12, and 10 times PE, respectively, covered for the first time, giving it a “buy” investment rating.
Risk warning
Downstream demand falls short of expectations; overseas market expansion falls short of expectations; risk of foreign exchange fluctuations.