Key points of investment:
On March 28, Yituo Co., Ltd. released its 2023 annual report: in 2023, it achieved total operating income of 11.534 billion yuan, down 8.2% year on year; net profit to mother was 997 million yuan, up 46.39% year on year; after deducting non-net profit of 926 million yuan, an increase of 20.02% year on year. The 2023 profit distribution plan is to distribute 3.194 yuan for every 10 shares to all shareholders.
The pre-release of China's four emissions demand has put pressure on this year's sales. The 2023 annual report of the company with high export sales growth achieved total operating income of 11,534 billion yuan, a year-on-year decrease of 8.2%; net profit to mother was 997 million yuan, an increase of 46.39% year on year; after deducting non-net profit of 926 million yuan, an increase of 20.02% year on year.
On a quarterly basis, Q1-Q4's revenue in 2023 was 4.194 billion, 3.054 billion, 3.03 billion, and 1,282 billion, respectively, up -1.28%, +28.23%, -18.64%, and -42.85% year-on-year; net profit to mother was 486 million, 268 million, 331 million, and -88 million, respectively, up 1.06%, 166.21%, 54.45%, and 23.16%; net profit after deducting non-return mother was $479 million, $247 million, respectively. 320 million and -120 million, year-on-year increases of 6.36%, 58.16%, 0.17%, and 22.34%, respectively.
By business in 2023, look at:
1) Agricultural machinery achieved operating income of 10.563 billion yuan, a year-on-year decrease of 9.32%. Overall demand in the domestic agricultural machinery industry declined in 2023 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-sized tractors in 2023, a year-on-year decline of 18.22%.
2) Power Machinery achieved revenue of 2,979 billion yuan, an increase of 15.65% over the previous year. In 2023, 151,052 diesel engine products were sold, which is basically the same as the previous year.
Gross margin increased slightly, and net interest rate rose sharply due to changes in fair value and reduction in impairment charges. The company's gross margin in 2023 was 15.89%, up 0.17 percentage points year on year; net interest rate was 8.58%, up 3.43 percentage points year on year. The main reason for the increase in net interest rates was that the company experienced large fair value change losses, asset impairment, and credit impairment charges last year, which had an impact of 3.15% on net interest rates.
Look at it by business. In 2023, the company's gross profit margin for agricultural machinery was 16.58%, up 2.53 percentage points from the previous year, and the gross profit margin for power machinery was 10.81%, down 1.7 percentage points from the previous year.
The company's four cost rates have remained stable. In 2023, the company's four-item expense ratio was 8.83%, an increase of 0.03 percentage points over the previous year.
The company benefiting from the four emissions promotion is more stable. The company is a leading enterprise in China's tractor industry. It is committed to becoming an “excellent agricultural equipment manufacturing service provider”, focusing on advanced agricultural machinery and equipment manufacturing, adhering to technological upgrading and structural optimization of the industrial chain, and continuing to provide a higher level of agricultural mechanization guarantee for China's agricultural development.
2023 is the first year that China's agricultural machinery industry has fully entered the national four era. Due to the shift in market demand, user purchasing costs increased and operation and maintenance costs increased after the national four switch, and demand in the domestic agricultural machinery market declined. In 2023, the company sold 72,300 units of large and medium towing products, a year-on-year decrease of 18.22%. The average unit price of tractors was 140,200 yuan, and the average price increased by 0.86 million yuan last year. The company continues to be deeply involved in key export regions such as Russian-speaking regions and South America, and the overseas market layout continues to expand. The export sales volume of tractor products increased by 43% year-on-year throughout the year.
After the implementation of the national four emission standards for non-road machinery, as technical requirements became higher and higher, subsidies declined year by year, putting obvious pressure on small and medium-sized enterprises, clearly raising the competitive threshold, and helping leading enterprises increase their market share. In addition, there is a clear upward trend in the power segment of tractors. First, the share of large wheel trailers in sales is gradually increasing, and second, the horsepower segment of large and medium horsepower models is expanding upward. The continuous optimization of the tractor product structure also helps the company to continuously improve average unit prices and profitability.
Tractor exports are another growth point. In recent years, the company has increased its export certification efforts and continued to promote export efforts in key markets. Exports have continued to grow at a high rate, driving the company's tractor business to open up new space.
Large-scale equipment upgrades promote agricultural machinery renewal and bring additional volume to industry demand. The State Council promotes large-scale equipment renewal and consumption trade-in action plans, encourages the continuous implementation of agricultural machinery scrapping and renewal subsidy policies, taking into account agricultural production needs and the level of agricultural mechanization development, to solidly push forward the scrapping and upgrading of old agricultural machinery and accelerate the structural adjustment of agricultural machinery.
After the introduction of large-scale equipment renewal and consumer trade-in action plans, local governments have successively introduced corresponding policies and rules, which are expected to drive stocks of old agricultural machinery to accelerate scrapping and replacement, and promote the growth in demand in the tractor market. As a leader in the tractor industry, Yituo Co., Ltd. is expected to fully benefit from the trend of large-scale equipment renewal for agricultural machinery.
Profit forecasting and valuation
The company is a leading domestic tractor enterprise. Benefiting from national policy requirements such as food security and agricultural machinery equipment safety, and compounding the company's product upgrades, the tractor market share is expected to increase further. At the same time, the company continues to enhance product competitiveness and broaden export space through active research and development. We forecast that the company's revenue forecast for 2024-2026 is 12.985 billion, 14.589.1 billion, and 16.136 billion, with net profit of 1,115 billion, 1,299 billion, and 1,461 billion yuan respectively. The corresponding PE is 16.87X, 14.47X, and 12.87X respectively. The company is an absolute leader in the tractor industry. The valuation is reasonable, benefiting from large-scale agricultural machinery equipment updates, and continuing to maintain the company's “gain” rating.
Risk warning: 1: Macroeconomic sentiment falls short of expectations: 2: Agricultural machinery subsidy policies fall short of expectations; 3: Market competition intensifies, gross margin is under pressure; 4: Raw material prices have risen sharply; 5:
New product expansion falls short of expectations; 6: Foreign market development risk.