Incident: Recently, Liu Gong released its 2024 quarterly report.
Comment:
2024Q1 increased performance and increased profitability. With 2024Q1, the company achieved revenue of 7.939 billion yuan, up 1.88% year on year and 23.95% month on month; net profit to mother was 498 million yuan, up 58.03% year on year, up 1099.48% month on month. Gross margin was 22.79%, up 3.99 pct year on year, up 1.41 pct month on month; net margin was 6.49%, up 2.33 pct year on year, up 4.77 pct month on month.
The sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were +0.55pct, -0.10pct, +0.22pct, and +0.07pct, respectively, with month-on-month changes of -2.94 pct, -1.39 pct, -0.73 pct, and +0.55pct, respectively.
The international business has been expanded in depth, and the share of overseas revenue has increased markedly. After years of overseas development and operation, the company has entered a stage of deep internationalization. It has set up four overseas manufacturing bases in India, Poland, Brazil and Argentina to develop local supply chains and achieve localized production. In 2023, the company added 39 new distributors, further improving channel coverage. Australian subsidiaries, Central Asian subsidiaries, Vietnamese subsidiaries, and Ivorian subsidiaries were established one after another, and Saudi and Kenyan subsidiaries are about to open. The European R&D center and the North American R&D center are in mature operation, and the R&D capacity to serve the world has further increased.
The company's overseas revenue in 2023 was 11.462 billion yuan, up 41.18% year on year, accounting for 41.65% of total revenue, up 10.99 pct year on year. Overseas sales of core products, loaders and excavators, maintained steady growth. Products such as bulldozers, graders, and small machines achieved rapid growth, and breakthroughs were achieved in the non-construction machinery business and overseas parts business. Revenue increased 70.00% and 69.00%, respectively. The gross margin for overseas markets in 2023 was 27.74%, up 3.36pct year-on-year.
Continuously optimize the product structure and increase the product market share. Sales of loaders, the company's core product, grew steadily. Sales of electric loaders increased 67.00% year on year, ranking first in market share; the sales growth rate of excavators was 20.00 pct higher than the industry, and the market share increased by 3.00 pct, a record high. The company continues to diversify its business layout and vigorously develop new strategic businesses and growth businesses such as mining machinery, aerial machinery, agricultural machinery, and industrial vehicles. The revenue of the aerial machinery business increased 112.00% year-on-year in 2023. In addition, challenging businesses such as lifting machinery, pile construction machinery, and concrete machinery have also achieved certain results. The company released 26 new crane products, and its gross profit increased by about 8.00pct.
Investment advice: Maintain an “Overweight” rating. The company's 2024-2026 EPS is expected to be 0.72 yuan, 0.88 yuan, and 1.06 yuan respectively, and the corresponding PE will be 15 times, 12 times, and 10 times, respectively, maintaining the “gain” rating.
Risk warning: (1) If downstream demand falls short of expectations, demand for the company's products weakens; (2) if overseas market demand for domestic companies' products decreases, it will put pressure on the company's performance; (3) if raw material prices rise sharply, the company's performance will face great pressure.