Description of the event
The company released its annual report. In 2023, it achieved revenue of 47.075 billion yuan, +13.08% year on year; realized net profit of 3,506 billion yuan, +52.04% year over year; realized net profit without return to mother of 2,708 billion yuan, +109.51% year on year. The 23Q4 company achieved revenue of 11.561 billion yuan, +5.26% year over year; realized net profit of 651 million yuan, +373.72% year over year; realized net profit without deduction of 347 million yuan, +228.33% year over year.
Incident comments
The full year's performance was high and in line with expectations. In '23, the company's net profit to mother and net profit after deducting non-return to mother were +52% and +110%, respectively. Despite the amortization of equity incentive expenses, the company's α advantage was highlighted in the context of the downward trend in the domestic cycle. Furthermore, in '23, the company calculated asset impairment and credit impairment totaling 884 million yuan to help launch the battle lightly.
The cultivation of new businesses has entered the volumetric stage, and excavators and high machinery have performed brilliantly. In terms of consolidating the base of traditional dominant sectors, the company's new business grew rapidly. The competitiveness of CUHK excavation products continued to improve. In '23, the revenue share of earthmoving machinery increased by +89.32%, and the domestic share doubled year-on-year, and the overseas sales scale increased by more than 100%; high machine products ranked among the leading domestic manufacturers, with the largest market share for domestic small and medium-sized customers. The product spectrum achieved full coverage of 4-72 meters, and the electrification penetration rate reached 90% +. The revenue share of the company increased by 24.16% compared to the same period last year, and the revenue share increased to 12.12%. Currently, the company is promoting the injection of high technology in an orderly manner and listed company Lu Chang Technology to seize the strategic opportunity period of high speed opportunities and promote high-quality development. At the same time, Lu Chang Technology is also expected to usher in new development opportunities in smart cars; at the same time, mining machinery achieved a breakthrough, with sales volume +140% year-on-year, with sales close to 800 million yuan; agricultural machinery is also progressing smoothly, and is expected to grow rapidly in 24 years.
Globalization is gaining prominence, and the share of export revenue has risen to 38%. Against the backdrop of a downward domestic cycle, the company's domestic revenue in '23 was -7.8% year-on-year, but the decline was less than that of the industry. At the same time, the international business continued to expand. Overseas revenue in '23 was +79.20% (including CIFI), and the overseas share increased by 14.04pct to 38.04%. Driven by exports, with the exception of the new sector, the revenue of concrete machinery and lifting machinery in the traditional sector increased slightly by 1.63% and 1.64%, respectively, over the same period last year. The company's overseas localization strategy has achieved remarkable results. Zhonglian Gongqi products have the highest market share in Turkey and Central Asia, and Jianji products maintain the largest market share in Turkey.
Benefiting from structural optimization, profitability improved significantly. The company's gross profit margin and net profit margin in '23 were 27.54% and 8.01% respectively, up 5.71 and 2.28pct, respectively. With the exception of the financial business, gross margins of all sectors increased. Among them, the gross margins of lifting machinery, earthmoving machinery, and heavy machinery increased by 8.13, 4.46, and 1.85 pct, respectively, over the same period last year. The gross profit margin for overseas in '23 was 32.23%, +10.21pct year on year, 7.57pct higher than domestic revenue. The increase in the share of overseas revenue led to an increase in overall profitability.
The domestic cycle has stabilized, and continued overseas expansion and product diversification are expected to be the main growth drivers in 24 years. CME expects domestic excavator sales to improve by +6.5% year on year in March, better than previous expectations. The domestic industry trend is expected to be low and high this year, and it is expected to bottom out and remain flat throughout the year. Looking forward to 24 years: 1) Emerging potential businesses such as excavators, high speed machinery, mining machinery, and agricultural machinery are developing rapidly and are expected to continue to grow rapidly. 2) Along with the increase in global competitiveness, the trend of construction machinery going overseas continues, and the company's overseas layout continues to expand. As overseas market recognition of the company's products continues to increase, exports are expected to continue to increase. The company's net profit for 2024-2025 is estimated to be 51.09 billion yuan and 7.50 billion yuan, respectively. The corresponding PE is 14X and 10X, respectively, and continues to be rated “buy”.
Risk warning
1. The recovery in domestic demand fell short of expectations, and the increase in performance in emerging sectors fell short of expectations; 2. Overseas market expansion fell short of expectations.