Incident: The company released its 2023 annual report, and achieved revenue of 47.08 billion yuan in 2023, +13.1% year-on-year; net profit to mother was 3.51 billion yuan, +52.0% year-on-year. Looking at a single quarter, Q4 achieved revenue of 11.56 billion yuan, +5.3% year over month, and net profit to mother of 650 million yuan, +373.7% year over year, -20.1% month on month. The company's business has grown dramatically, and new business and internationalization provide growth momentum.
Driven by new businesses such as earthwork and high machinery, as well as overseas business, the company's performance improved rapidly in 23 years. In 2023, the company continued to improve, strengthen, and expand traditional advantage sectors, accelerate the development of new productivity, cultivate and expand high-growth emerging sectors such as earthmoving machinery, aerial machinery, and mining machinery. All sectors of the construction machinery industry achieved positive growth and strong growth momentum; lifting machinery achieved revenue of 19.29 billion yuan, +1.6% year on year; concrete machinery revenue of 8.6 billion yuan, +1.6% year on year; earthmoving machinery revenue of 6.65 billion yuan, same +89.3%; aerial machinery revenue was 5.71 billion yuan, +24.2% year on year. At the same time, the company's overseas business achieved revenue of 17.91 billion yuan, +79.2% over the same period last year, accounting for an increase in the company's overall performance.
In '23, the company's various products and gross margins at home and abroad increased, cost control capabilities were strong, and profitability improved across the board.
In 2023, the company's comprehensive gross margin was 27.5%, +5.7pp; net profit margin was 8.0%, +2.3pp. From a business perspective, the company achieved a double increase in domestic gross margin, 24.7% domestic gross profit margin, +2.9pp, foreign gross margin 32.2%, and +10.0pp; at the same time, gross margin of all business segments increased: gross margin of lifting machinery 31.0%, +8.1pp; concrete machinery 22.9%, +1.9pp; earthmoving machinery 27.4pp; aerial machinery 22.7%, +1.9pp. The expense ratio for the 2023 period was 18.4%, +2.9pp. Among them, sales, management, R&D, and financial expense ratios were +1.2, +1.3, +0.3, and +0.1pp, respectively, mainly due to the increase in the company's investment in sales expenses to expand overseas markets and the increase in share payment expenses related to employee stock ownership plans.
Domestic demand is nearing an upward inflection point, the global layout is gradually improving, and the company can be expected to grow at a high rate. Domestic construction machinery is mainly driven by renewal demand. The 8-10 year equipment renewal cycle. In 2015, domestic excavator sales were at the bottom of the previous cycle. At that time, the industry had about 1.2 million excavators; in 2023, sales volume was about 90,000 units, and the industry owned about 19.2 million units. It is expected that industry renewal demand will bottom out in 24, and the cycle will gradually enter the repair channel. The company is a pioneer in overseas mergers and acquisitions in the industry. It continuously integrates high-quality global resources, and continues to expand and upgrade overseas production bases to further cultivate the market with localized employees. The share of overseas revenue will increase by 6% to 38% in 2020-2023, which is expected to continue to drive the company's performance improvement. Currently, the company's traditional products are highly competitive, and the new sectors of earthmoving machinery and aerial machinery have sufficient growth momentum, and are expected to maintain high performance growth.
Profit forecasting and investment advice. Domestic construction machinery renewal demand is expected to bottom out and improve. The company is leading traditional industries such as lifting machinery and concrete machinery, which is expected to form strong performance support; it is expected to achieve a high increase in performance due to two major advantages, such as increased market share of new products such as excavators and aerial machinery, and overseas business expansion. The company's net profit from 2024-2026 is estimated to be 45.3, 59.6, and 7.21 billion yuan, corresponding to EPS of 0.52, 0.69, and 0.83 yuan. Corresponding to the current PE share price is 15, 12, and 10 times, and the compound net profit growth rate for the next three years is 27%. The company was given a target PE of 20X in 2024, with a target price of 10.40 yuan for six months, covered for the first time, and given a “buy” rating.
Risk warning: the risk of macroeconomic policy changes, the risk of increased market competition, and the risk of exchange rate fluctuations.