Description of the event

The company released a quarterly report. 2024Q1 achieved revenue of 7.939 billion yuan, +1.88% year over year; realized net profit of 498 million yuan, +58.03% year over year; realized net profit of 457 million yuan without return to mother, +67.08% year on year.

Incident comments

The company's domestic and overseas business performance continues to outperform the industry or contribute significantly to revenue and performance growth. In terms of industry, 24Q1 excavator sales volume was 50,000 units, -13.1% year on year; of these, domestic sales were 26,000 units, -8.3% year over year, and the decline continued to narrow; exports were 24,000 units, -17.9% year over year. In 24Q1, China's loader sales volume was -9.1% year-on-year, of which domestic sales were -16.9% year-on-year, and exports remained basically the same. In the context of the industry's downward cycle, the company's overall sales growth rate in the domestic market outperformed the industry in '23, the sales growth rate of earthmoving machinery products outperformed the industry by 7 pcts, the overseas market sales growth rate outperformed the industry by 20 pcts, and the 24Q1 company's growth rate or continued to outperform the industry, and its market share may continue to increase, bringing growth impetus to revenue and performance.

Structural optimization combined with cost reduction and efficiency increases the company's profitability. The gross margin of the 24Q1 company increased by 3.99 pct to 22.79% year on year, and the net margin increased by 2.34 pct to 6.49% year on year, mainly due to: 1) the company's revenue structure or continuous optimization, the share of overseas revenue in 23 to the main business increased by 10.3 pct to 41.7%, and the overseas gross margin in 23 was higher than the domestic gross margin of 11.86 pcts. 24Q1 overseas revenue share or continued upward trend, driving the overall gross margin increase; 2) The company continued to promote cost reduction and efficiency throughout the value chain by deepening lean production and optimizing processes and products Structural optimization accelerates supplier integration and procurement quality improvement, and effectively reduces costs and improves efficiency. There may still be room for cost reduction in the future, and profitability is expected to continue to improve further.

Electrified and diversified businesses are developing vigorously to create a new growth curve. On the one hand, the company continues to promote the electrification of multiple product lines. Electric products already cover 11 product lines, including loaders, excavators, mining trucks, and aerial work platforms. Sales of electric loaders increased 67% year-on-year in '23. The market share is leading in the domestic market, which is expected to contribute to the increase. On the other hand, the company's strategic layout is diversified, and the mining machinery business has simultaneously seized domestic and foreign markets, with significant year-on-year sales growth; the high-altitude machinery business built a brand concept with the best total cost of ownership and TCO and serving urban applications, 23 with annual sales revenue +112%, of which +123% overseas; the agricultural machinery business completed batch switching of national four tractor products and actively explored domestic and foreign markets; sugar cane harvesters entered international markets such as Australia and Thailand; the forklift business was comprehensively transformed to reduce costs and increase efficiency, and overseas revenue was +57% in '23. Overseas accounts for +60%; the prestress business has achieved 12 major technological breakthroughs and transformation of achievements in 23 years, won bids for many major domestic and foreign projects, and continued to improve its technical strength.

Maintain a “buy” rating. Domestic sales of excavators in China improved by +9.3% year-on-year in March. CME estimates that domestic sales remained flat in April, and the probability that the domestic industry bottomed out and remained flat throughout the year. The company's domestic business is expected to continue to outperform the industry. Over the years, the overseas layout has become more and more perfect and has entered a harvest period. It is expected to continue to grow rapidly in the future. Combining diversification to create a new growth curve and reduce the cost of national reform, the company's performance and profitability are expected to continue to improve. In 2024-2025, the company is expected to achieve net profit of 1,413 billion yuan and 1.929 billion yuan respectively, corresponding to PE 15 times and 11 times, respectively, maintaining a “buy” rating.

Risk warning

1. The growth rate of infrastructure and real estate investment is lower than expected;

2. Overseas market expansion falls short of expectations.