Incident: The company released its 2023 annual report and 2024Q1 performance forecast. In 2023, it achieved revenue of 27.52 billion yuan, +3.9% year over year; net profit to mother was 870 million yuan, +44.8% year over year. Single Q4 revenue was 6.41 billion, -0.6% yoy, +5.4% month-on-month; net profit to mother was 40 million, +211% YoY, -80.5% month-on-month; 2024Q1 expects to achieve large-scale net profit of 46-540 million, an increase of 45-70% year-on-year. The company's business has grown significantly, and its profitability has increased significantly.
New and old businesses and overseas business have made concerted efforts, and the company's performance has improved rapidly in 23 years. In 2023, the company's overseas business achieved revenue of 11.46 billion yuan, +41.2%, accounting for 41.7%, and the gross margin in the overseas market was 27.74%, higher than the domestic gross margin of 15.88% of 11.86pp, driving the company's profitability; in overseas markets, loaders and excavators grew steadily, with high growth rates of high machinery, bulldozers, graders, and small machines, and +70% year-on-year for non-construction machinery products. By sector, in 2023, the company's earthwork and stone sector revenue was +2.2% year over year, and the prestress sector was +7.9% year over year; by product segment, strategic new businesses such as mining machinery, aerial machinery, agricultural machinery, and industrial vehicles continued to expand. Among them, the overall revenue of high machinery was +112% and overseas +123%.
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 20.8%, +4.0pp year on year, net margin was 3.42%, year on year +0.98pp. The cost ratio for the period was 15.0%, up 2.2 pp year on year. By product, the increase in gross margin was mainly due to the gross margin of the earthwork sector +5.56pp to 23.4%, the other construction machinery sector +1.66pp to 13.7%, and the prestress sector +4.19pp to 24.8%. At the same time, the increase in the company's share of overseas business with high gross margin also led to an increase in the company's profitability, and the share of the company's overseas business further increased to 50% in 24Q1, promoting a significant increase in the company's operating performance.
Domestic demand is nearing an upward inflection point, and the company continues to gain strength in multiple businesses, domestic and foreign markets, mixed reform, improving quality and efficiency, etc., and high growth can be expected. Domestic construction machinery is mainly driven by renewal demand. The equipment renewal cycle is 8-10 years. Taking excavators as an example, domestic excavator sales in 2015 were 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 years, and the cycle will gradually enter the repair channel. Since the company's mixed reform and overall listing, it has transformed and innovated, and enhanced execution. The global layout has been continuously deepened, and the revenue growth rate in the international and domestic markets has surpassed the industry in 23 years; the competitiveness of segmented products has continued to improve, the market share of excavators has increased rapidly, electric loader sales have grown rapidly, and the high machinery, forklift, and agricultural machinery sectors have expanded smoothly; under the catalyst of employee incentives and other measures, operating efficiency has improved markedly and profitability is expected to maintain high growth.
Profit forecasting and investment advice. Demand for renewal in the domestic construction machinery industry is expected to bottom out and improve. The company's new and old businesses and overseas business are expected to form strong performance support and achieve high growth. The company's net profit from 2024-2026 is estimated to be 12.5, 16.4, and 2.14 billion yuan, corresponding to EPS of 0.64, 0.84, and 1.09 yuan. Corresponding to the current share price PE is 17, 13, and 10 times, and the compound net profit growth rate for the next three years is 35%. The company was given a target PE of 20X in 2024, with a target price of 12.80 yuan. It covered for the first time, and gave it a “buy” rating.
Risk warning: risk of macroeconomic policy changes, risk of uncertainty in overseas market development, risk of exchange rate fluctuations.