Incidents:
Recently, the company released its 2023 report. In 2023, the company achieved operating income of 27.519 billion yuan, +3.93% year on year; realized net profit of 868 million yuan, +44.80% year on year; single 2024Q1 company achieved operating income of 7.939 billion yuan, about +1.88% year on year; net profit to mother of 498 million yuan, +58.03% year over year. The comments are as follows:
Profitability improved, and the rate of expenses increased during the period. In 2023, the company's gross sales margin was about 20.82%, about +4.02pct year on year; the net profit margin was about 3.42%, +0.98pct year on year. With product structure optimization and overseas market advancement, profitability is expected to increase further. The company's cost ratio for the period was 14.98%, +2.24pct. Of these, sales/management/R&D/finance expenses accounted for 8.18%/2.96%/3.29%/0.55% of operating income, respectively, mainly due to sales and R&D expense ratios of +1.30pct and +0.47pct year over year, and overall cost control was good. In 2023, the company achieved net operating cash flow of 1,629 million yuan, of which net operating cash flow of -41 million yuan was achieved in 24Q1 alone.
The market share of loaders and excavators increased, and the penetration of electric equipment continued to accelerate. The increase in the market share of the company's excavator and loader products is mainly due to the company's active deployment of four national products in the early stages, with a remarkable first-mover advantage, grasping the major trend of electrification and intelligence of construction machinery, and providing customers with full life cycle management to achieve post-product market development. In the loader sector, the company maintained its leading position in market share in 2023 while electric loader sales were +67% year-on-year. Relying on the mature supply system of the domestic lithium battery industry chain and the positive influence of battery prices, the customer TCO recovery period continues to shorten, and the electric loader industry continues to accelerate.
The smart factory layout is accelerating, and overseas markets are expanding smoothly. The company's smart loader factory was put into operation in the first half of 2023, which can achieve flexible assembly of 1.5 to 7T loaders; in addition, the final assembly line of the excavator smart factory project was successfully put into operation at the end of November 2023 and is currently in the production capacity climbing stage. It is expected that after full commissioning, the overall manufacturing efficiency will increase by 40%, and manufacturing costs will drop by about 30%, helping the company reduce costs and increase efficiency. The company actively lays out in overseas markets and has 20 manufacturing bases and 17 regional parts centers around the world. In 2023, the company achieved overseas revenue of about 11.462 billion yuan, +41.18% year-on-year, and overseas sales outperformed the industry by about 20 percentage points. As the company deepens mixed ownership reform and continuous optimization of business management, the company has sufficient momentum for future development, and profitability is expected to gradually increase.
Investment rating: The company's net profit for 2024-2026 is estimated to be 1,533 billion, 1,870 billion, and 2,507 billion, respectively. The corresponding PE is 13x, 11x, and 8x, respectively, covered for the first time, giving it an “increase in wealth” rating.
Risk warning: Overseas expansion falls short of expectations; risk of failure of profit forecasting and valuation models