Finance Association, April 22 (Reporter Huang Lu) Domestic and foreign demand for downstream excavators is weak, and Hengli Hydraulic (601100.SH) maintained a year-on-year growth rate of 10% in both revenue and net profit last year. The company said that the diversified layout is beginning to contribute to the increase, and the Mexican hydraulic parts production base is expected to test production in the second quarter of this year.

Tonight, Hengli Hydraulic released its 2023 financial report. Last year, the company achieved operating income of 8.985 billion yuan, an increase of 9.61% year on year; net profit of 2,499 billion yuan, an increase of 6.66% year on year.

By product, hydraulic cylinders and hydraulic pumps and valves are the company's main source of revenue. Its hydraulic cylinder revenue increased 2.37% year on year; hydraulic pumps and valves increased 18.64% year on year. Hydraulic cylinders include special cylinders for excavators and non-standard cylinders for heavy equipment. The production and sales volume of the main products listed by the company shows that sales of special cylinders for excavators decreased by 3.35% year on year; sales volume of non-standard cylinders increased by 16.06% year on year.

Last year, the growth rate of domestic excavator export sales changed from positive to negative, and domestic sales declined for the third year in a row. According to statistics from the China Construction Machinery Industry Association on major excavator manufacturers, a total of 195,000 excavators were sold in 2023, a year-on-year decrease of 25.4%. It was about 90,000 units in China, a year-on-year decrease of 40.8%; exports were 105,000 units, a year-on-year decrease of 4.04%.

Hengli Hydraulics said that due to the declining boom in the excavator industry, production and sales of the company's excavator-related hydraulic products have all declined by a certain margin. The company has taken measures to reduce costs and increase the gross margin of hydraulic cylinders, accessories and casting products. Financial reports show that the gross margin of the company's hydraulic cylinders increased by 1.13 percentage points year on year.

Faced with cyclical fluctuations, Hengli Hydraulic hedged the impact through three major measures last year: first, the company expanded non-excavated product categories and downstream application markets; second, developed new non-construction machinery products; and third, accelerated international layout. In the annual report, the company revealed, “The diversified downstream layout began to contribute significantly last year, and production and sales of hydraulic products in the non-excavation sector have all increased dramatically.”

In terms of new business development, some samples of the company's layout, such as ball screws, roller screws, and guide rails, are in trial production and will be tested in the first quarter of 2024. Furthermore, the company is speeding up its international layout and establishing a hydraulic parts production base in Mexico. The main project was basically completed during the reporting period, and trial production is expected in the second quarter of this year. At the same time, subsidiaries have been set up in Singapore and Brazil to further expand the service network in order to better participate in global competition. The company will use its Mexican factory as a base to increase its overseas market share.

Based on the company's forecast of the industry, the company's business plan is to strive to achieve a 6% year-on-year increase in revenue in 2024.