We maintain "Accumulate", and increase TP to HK$26.65. China is expected to focus more on the manufacturing sector with supportive policies. We maintain our Haitian International (the "Company") 2024-2026 shareholders' net profit forecasts at RMB2,761 mn / RMB2,984 mn / RMB3,222 mn, respectively. We forecast the Company's earnings per share in 2023/ 2024/ 2025 to be RMB1.730, RMB1.870, and RMB2.019, respectively. Monetary policy is expected to further ease in 2024 thereby increasing valuation ratios. Our TP represents 13.6x/ 12.5x/ 11.6x 2024-2026 PE ratio and 1.8x 2024 PB ratio.
The Company's FY23 results were slightly stronger than our expectations. The Company's revenue in FY23 was RMB13.1 billion, an increase of 6.2% YoY, stronger than our expectations. Despite less than favorable domestic macroeconomic conditions, demand in overseas markets has increased under the influence of structural change in the global industrial chain. Sales increased notably in certain regions of Europe, North America and Southeast Asia. The Company recorded overseas sales of RMB5.2 billion, an increase of 17.3% YoY.
The Company's net margin improved slightly. The Company's net profit margin in FY2023 increased by 0.7 ppt YoY to 19.1%. This profit margin increase over the previous year was due to 1) Cost of sales decreasing due to lower raw material prices. 2) A temporary increase in finance income due to an increase in restricted bank deposits and more favorable currency fluctuations.
Domestic demand set to recover with policy driven growth. We anticipate that the government will persist in boosting domestic demand and continue with supply-side reforms, propelling China's economic restructuring. This will be achieved through strategies focused on high-quality and advanced manufacturing, improving industrial layout, and encouraging open international cooperation. Moreover, policies that promote the renewal and trade-in of large-scale equipment and consumer goods are poised to increase demand within the company's downstream industries and motivate consumers to upgrade their equipment. We expect these comprehensive growth-stabilizing measures to hasten the recovery of the domestic economy as they are rolled out and executed.
Catalysts: Domestic demand recovery; Stronger than expected domestic industrial policy.
Risk factors: Domestic recovery may be less than expected; Potential international policy risk.