Core views:
The company's performance continued to grow, and gross margin increased significantly. According to the company's annual report, in 2023, it achieved operating income of 20.078 billion yuan, +30.5% year-on-year; net profit to mother was 1.929 billion yuan, +15.86% year-on-year. The gross profit margin for '23 was 26.86%, +3.51 pct. By sector, in 2023, the mining equipment sector achieved revenue of 11.8 billion yuan, +19%; the logistics equipment sector achieved revenue of 5.8 billion yuan, +26% year over year; and the newly merged oil and gas equipment sector achieved revenue of 1.5 billion yuan.
Investment in R&D in emerging businesses has increased, and the cost side is under pressure in the short term. The company's net profit margin in '23 was 9.04%, -1.63pct year on year. It is mainly due to a significant increase in the company's R&D investment in smart mines, smart ports, driverless cars, robotics, emerging industry equipment and oil and gas equipment. In '23, the company's R&D expenses were 1,681 billion yuan, +95.5% year-on-year, and the R&D cost rate was 8.3%, +2.8pct year on year. In the long run, the company will benefit from continuous investment in R&D and enhance its core competitiveness.
Oil and gas equipment contributed to revenue growth, and the trend of electrification+intelligence became prominent. In June '23, the company merged with Sany Petroleum Technology and achieved revenue of 1,502 billion yuan in '23, +8% over the same period last year. New intelligent and electrified mining products continue to penetrate the market. The company is expected to benefit from the trend of intelligent coal machine+HAECO electrification and continue to contribute to revenue growth.
The internationalization strategy has achieved remarkable results, and overseas business continues to grow rapidly. In '23, the company achieved overseas business revenue of 6.36 billion yuan, +50.7% year over year, accounting for +4.2 pct of total revenue. Among them, the logistics equipment sector had overseas revenue of 3,554 billion yuan, +68.75% over the same period. Electric HAECO developed well. Benefiting from the leading edge in the domestic electrification industry chain, the company's HAECO internationalization strategy entered a dividend period.
Profit forecasting and investment advice. The company's 24-26 EPS is expected to be 0.81/1.00/1.17 yuan/share, giving the company a valuation of 10x PE in 2024, corresponding to a reasonable value of HK$9.11 per share, maintaining a “buy” rating.
Risk warning: Risks such as a downturn in upstream sentiment, a sharp rise in shipping costs, and large exchange rate fluctuations