Event: The company released its 2023 annual report and 2024 quarterly report. In '23/24Q1, the company achieved revenue of 11.41/188 million yuan, -6.27%/+13.36% YoY; realized net profit to mother of 120/0.09 million yuan, +5.25%/+12.32% YoY.

Performance achieved steady growth and increased profitability. In '23, the domestic construction machinery industry was still in a period of downward adjustment. Affected by this, the company's revenue growth rate declined. In '23, the company achieved revenue of 1,141 billion yuan, of which the revenue from engineering mixing equipment/native aggregate processing equipment/accessories/aggregate resource recycling equipment was 6.09/3.10/1.06/100 million yuan, respectively, -21.87%/+6.05%/+21.05%/+151.07% compared with the same period last year. The company's profitability has increased, mainly due to an increase in gross margin. In '23, the company's gross sales margin/net margin was 25.6%/10.55%, respectively, an increase of 3.48pct/1.15pct. In terms of cash flow, the company's net cash flow from operating activities in '23 was $863.18,400, increasing the net present ratio from 1% in '22 to 72% in '23. In 24Q1, the company continued its growth trend, and revenue/net profit to mother increased by 13.36%/12.32% year-on-year respectively.

Overseas business has performed well, its share continues to increase, and the international layout continues to advance. The company's overseas business revenue in '23 was 220 million yuan, a year-on-year increase of 54.22%. The revenue share increased from 2.33% in 2019 to 19.25% in 2023. According to the General Administration of Customs, the total value of China's construction machinery exports in 2023 was US$48.5 billion, up 9.4% year on year; of these, exports to countries along the “Belt and Road” were US$21.05 billion, up 24.1% year on year. The company continues to pursue an internationalization strategy. By the end of 2023, overseas product sales had entered many countries and regions such as Europe, North America, Southeast Asia, and the Middle East.

Continuous breakthroughs have been achieved in new product development and market development. In '23, the company's crushing and screening equipment achieved sales revenue of 229 million yuan, an increase of 66.68% over the previous year; at the same time, 4 new E-series electric drive mobile crushing equipment were launched, which are suitable for situations where power grids are developed and equipment mobility is low. Aggregate resource recycling equipment, represented by construction waste recycling equipment, achieved revenue of 100 million yuan, an increase of 151.07% over the previous year. In terms of engineering mixing equipment, the company innovatively developed ultra-high performance concrete (UHPC) equipment, which solved the pain point of uneven addition and labor consumption due to artificial addition of steel fibers. In addition, the company launched new mud treatment equipment, and successively won bids for two projects: Jiangsu Kunshan Urban Construction Liquid Solidified Soil and Hainan Fengyuan Mud Cake Muck Improvement Projects.

Profit forecast, valuation and rating: Considering the impact of the slow recovery of the domestic construction machinery industry on the company's performance, we lowered our net profit forecast to 1.36 and 156 million yuan (previous values were 1.86 million yuan and 239 million yuan), added the net profit forecast for 26 million yuan, and the corresponding EPS for 24-26 was 1.25, 1.44, and 1.69 yuan, respectively, and the corresponding PE was 15x, 13x, and 11x, respectively. The company's international layout continues to advance, and breakthroughs have been made in new product development and market development. The company's performance is expected to continue to grow and maintain the “gain” rating.

Risk warning: macroeconomic fluctuation and policy adjustment risk, market competition risk, raw material price fluctuation risk.