Incidents:

Recently, the company released its 2023 report. In 2023, the company achieved operating income of 6.963 billion yuan, +3.89% year on year; realized net profit of 458 million yuan, +13.82% year on year; single 2023Q4 company achieved operating income of 1,625 million yuan, about -19.63% year on year; net profit to mother of 99 million yuan, -11.05% year on year. The comments are as follows:

The gross margin increased, and the cost ratio increased during the period. In 2023, the company's gross sales margin was about 22.22%, about +1.98pct year on year; the net profit margin was about 6.62%, +0.89pct year on year. As the company's product structure is further optimized, profitability is expected to increase further. The company's cost ratio for the period was 14.32%, +2pct year over year, of which sales/management/ R&D/finance expenses accounted for 4.96%/5.08%/3.80%/0.48% of operating income, respectively. The main reason was that sales and financial expense ratios were +0.85pct and +0.97pct year over year, and overall cost control was good. In 2023, the company achieved a net operating cash flow of 100 million yuan, of which net operating cash flow of 108 million yuan was achieved in Q4.

The product structure has been optimized, and the big car strategy is progressing steadily. The company closely follows the trend of electrification of forklifts, actively expands production capacity, continuously improves the product range and adjusts the domestic and overseas marketing system for large trucks, and optimizes and builds a strong supply chain system. In 2023, the company's heavy truck sales continued to grow by more than 60%, orders for Class 1 and Class 2 forklifts grew rapidly, and continued R&D and optimization around product intelligence and core components to launch new products such as high-performance G series electric counterbalance forklifts. At the same time, the company maintains a leading position in the global market in the field of light and small forklifts, and continues to break through in the aftermarket and leasing business. In 2023, the gross margin of the company's warehousing and logistics vehicle and equipment sector was +3.9 pct year-on-year, with a significant improvement.

The integrated layout of smart logistics is being accelerated, and overseas markets continue to expand. The company provides a comprehensive solution for one-stop smart logistics system services. It has completed more than 2,000 related logistics system engineering cases worldwide, gradually forming a whole industry chain service model of core equipment system+leading software system+system integration solutions+operation service system. France's SAVOYE company continues to expand its market in the US, southern Europe, etc.; while maintaining its leading market position in the new energy industry, Zhongding Integrated is actively developing non-new energy industry markets, such as the photovoltaic and semiconductor industries. At the same time, the business and R&D synergy between Zhongding Integrated and French SAVOYE continues to increase.

Investment rating: The company's net profit for 2024-2026 is estimated to be $542 million, 636 million, and 755 million, respectively. The corresponding PE is 9x, 8x, and 7x, respectively, covered for the first time, giving it an “increase in wealth” rating.

Risk warning: risk of changes in overseas trade policies; risk of failure of valuation models and profit forecasts