Matters:
The company released its 2023 annual report and 2024 quarterly report. The company achieved revenue of 6.312 billion yuan in 2023, up 15.92% year on year, achieving net profit of 1,867 billion yuan, up 48.51% year on year, net profit after deducting non-return to mother of 1,888 billion yuan, up 46.60% year on year; the company achieved revenue of 1,452 billion yuan in the first quarter of 2024, up 11.53% year on year, realized net profit to mother of 302 million yuan, a decrease of 5.4% year on year and net profit after deducting net profit of 377 million yuan year on year, up 22.37% year on year.
Commentary:
Overseas arm sales have helped to increase performance, greatly improve profit margins, and further improve the quality of operations. In 2023, the company continued to firmly implement the global strategy, accelerate overseas market expansion, and achieved a significant increase in net profit based on its own advantages such as brand strength, product performance, R&D innovation, and intelligent manufacturing. While deepening the high-end market in Europe and the US, we are accelerating the expansion of emerging markets. In 2023, we achieved a total overseas revenue of 3.84 billion yuan, an increase of 13.35% over the previous year, and the overseas revenue share of our main business reached 64.4%. From a product perspective, arm product volume combined with overseas market development provided a strong impetus for the company's performance growth. Arm products accounted for 41.0% of sales revenue, up 13.2 pcts year on year; arm electric models accounted for 73.36% of sales, up 11.1 pct year on year; comprehensive gross margin of arm products reached 30.5%, up 9.9 pct year on year, and overseas arm product sales revenue increased 141.3% year on year. While optimizing the product structure and regional structure, benefiting from factors such as low raw material prices and exchange rate factors, the company's comprehensive gross margin reached 38.5%, a significant increase of 7.5 pct over the previous year. The company's sales, management, R&D, and financial expenses rates were 3.7%, 2.2%, 3.5%, and -3.9%, respectively. The cost rate for the period was 5.5%, and the management level was excellent.
The performance of the 24Q1 deduction is still impressive. The Phase V factory climbs the slope and is optimistic that it will continue to grow steadily throughout the year. In the first quarter of 2024, profit and loss from changes in fair value - 100 million yuan dragged down net profit performance. Against the backdrop of a low season at home and many factors of instability overseas, the company's net profit withheld from mother still achieved a year-on-year increase of 22.37%, demonstrating the company's strong strength. The fifth phase of the company's “large-scale intelligent high-altitude platform project with an annual output of 4,000 units” has entered the trial production stage. It is expected that as production capacity climbs, production and sales of high-meter, customized, and differentiated arm-type products are expected to increase further in 2024, providing an increase in the company's performance growth.
It is expected that with the advent of the second quarter, domestic sales are expected to recover as domestic sales enter the peak season. At the same time, with the help of factors such as product strength and overseas channel advantages, the company's performance growth momentum is expected to be maintained. The Phase 5 plant is a leading intelligent manufacturing plant in the industry. It is expected that with the commissioning of highly automated factories and the gradual release of production capacity, the company's profitability is expected to further increase due to scale effects.
Electrification enhances product competitiveness and increases CMEC holdings to expand further into the US market. The company continues to increase R&D investment. The R&D expenses in 2023 were 220 million yuan, an increase of 8.74% over the previous year. Driven by years of technology accumulation and R&D investment, the company has many industry-leading technical reserves, and has now formed more than 200 product specifications. The company is the first company in the industry to enable high-meter digital arm products to enter containers in the form of a complete machine, which can effectively reduce transportation costs, improve shipping efficiency, shorten equipment delivery times, and improve customer satisfaction.
At the same time, the company has a keen insight into the market and responds positively to customer needs. On the basis of continuing to maintain a nearly 100% electrification rate of scissor and mast products, the arm electrification rate increased to 73.36% in 2023, an increase of 11.07pct. In recent years, due to factors such as US GDP growth and government policies encouraging infrastructure, the US aerial work platform rental market has shown strong new demand in terms of stable renewal demand. According to the company announcement, citing the “IPAF Rental Market Report 2023” report data, the US rental market's aerial work platform rental revenue in 2022 was about 13.6 billion US dollars, an increase of 15% over the previous year. In order to maintain a reasonable utilization rate of equipment, US leasing companies are gradually expanding their fleet size. According to the company's announcement, the CMEC share acquisition was completed on April 22, 2024, and the company already holds 99.5% of its shares. CMEC's MEC brand is well known in the US and has a good cooperative relationship with local leasing companies. The two sides will make better use of their complementary advantages, enhance synergy, and facilitate the further development of the company's products in the US market.
Investment advice: The company is a leading domestic aerial work platform. The scale effect of arm product deployment has greatly increased the company's profitability. The products are widely favored by high-end markets in Europe and the US. They are optimistic that the commissioning of highly automated smart factories will bring about a double increase in business scale and profitability. Adjust the profit forecast based on the company's business situation in 2023. We expect the company's revenue from 2024 to 2026 to be 76.43 billion yuan, 86.14 billion yuan, and 9.486 billion yuan respectively (the original forecast was 83.46 billion yuan and 9.548 billion yuan respectively from 2024 to 2025), up 21.09%, 12.71%, and 10.12% year on year, respectively, and net profit to mother of 21.33, 24.95 billion yuan, and 2,806 billion yuan respectively (the original forecast was 21.23 billion yuan and 2.404 billion yuan respectively), up 14.25%, 16.97% and 12.46% year-on-year respectively ; EPS was 4.21, 4.93, and 5.54 yuan respectively. Referring to comparable company valuations, 18 times PE was given in 2024, and the corresponding target price was 75.81 yuan. There is room for about 20% of the stock price compared to the current one, maintaining a “strong push” rating.
Risk warning: Increased market competition; trade frictions; overseas macroeconomic fluctuations; fluctuations in raw material prices and exchange rates; uncertainty about the company's promotion of related matters.