Core views:
Performance was in line with expectations, and profit margins continued to recover. The company released its 2023 annual report and 2024 quarterly report. In '23, the company achieved revenue of 74.02 billion yuan, a year-on-year decrease of 8.4%; realized net profit to mother of 4.53 billion yuan, an increase of 5.5% over the previous year. 24Q1 achieved revenue of 17.83 billion yuan, down 1% year on year; realized net profit of 1.58 billion yuan, up 4.2% year on year, in line with overall expectations. The 24Q1 gross profit margin was 28.15%, up 0.55pct year-on-year, and the 24Q1 net profit margin was 9.2%, setting a record high in a single quarter in the past 10 quarters.
Internationalization has achieved remarkable results, leading construction machinery overseas. According to the company's 23 annual report, Sany Heavy Industries' overseas revenue reached 43.3 billion yuan, an increase of 18.3% over the previous year; the share of overseas revenue in '23 reached 60.5%, an increase of 14.8 pcts over the same period in '22. The company's overseas share has gradually increased, which has also led to an increase in gross margin. In the future, the company's horizontal product line is expected to continue to accelerate overseas, and non-excavation products are expected to take advantage of the brand effect of excavators to continue to maintain relatively high export growth. The company's revenue in Europe reached 16.25 billion yuan in '23, an increase of 38% over the previous year. The revenue in the European region is already basically the same as in Asia and Australia. The overall gross margin of overseas markets reached 30.8% in '23, an increase of 4.4 pct over '22.
High quality development remains the same, and asset quality is excellent. High-quality development is reflected in product structure optimization and internal risk optimization. According to the company's annual report, at the end of '23, the company had already built 33 lighthouse factories, making continuous breakthroughs in the intelligent operation of intelligent manufacturing machines. The 24Q1 operating cash flow of 4.4 billion yuan is mainly due to strict inventory control policies and good collection conditions since the second half of '23. The company's revenue ratio is good, and while actively going overseas, it has achieved high-quality development.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be 66.0/80.8/9.24 billion yuan, and EPS is 0.78/0.95/1.09 yuan/share, respectively. The company is a leader in construction machinery, and overseas business expansion has achieved remarkable results. Considering the position of cycle recovery and active expansion of overseas markets, maintain a reasonable value of 19.32 yuan/share, and give a “buy” rating.
Risk warning. The risk of falling demand for infrastructure and real estate investment; the risk of domestic equipment price fluctuations; the risk of overseas market expansion falling short of expectations.