Description of the event
In 2023, the company achieved revenue of 92,848 billion yuan, -1.03% year on year; realized net profit of 5.326 billion yuan, +23.51% year over year; realized net profit without deduction to mother of 4.497 billion yuan, +29.47% year on year. 2023Q4 achieved revenue of 21.178 billion yuan, +13.21% year over year; realized net profit of 487 million yuan, +234.04% year over year; realized net profit without deduction of 126 million yuan, +110.06% year over year. 2024Q1 achieved revenue of 24.174 billion yuan, +1.18% year over year; realized net profit of 1,600 billion yuan, +5.06% year over year; realized net profit without deduction of 1,466 billion yuan, +12.48% year over year.
Incident comments
Overseas business is growing rapidly, and domestic performance is superior to the industry. The company's overseas revenue was +33.70% year-on-year, and overseas business grew rapidly. By the end of '23, the company had 39 overseas subsidiaries and 40 large-scale overseas service parts centers. By the end of '23, the company had 39 overseas subsidiaries, 40 large-scale overseas service parts centers, and a marketing network covering 193 countries and regions around the world. The overseas layout is becoming more and more perfect, and overseas business is expected to continue its high growth trend. Domestically, domestic sales of excavators in China were -40.8% year on year. Against the backdrop of a sharp decline in the domestic cycle, the company's domestic revenue was -15.69% year over year, and the decline was far less than that of the industry. In 24Q1, China's total excavator sales volume (including exports) was -13.1% year-on-year. The industry is still in a downward cycle, but the company's revenue achieved positive year-on-year growth, and its performance continued to outperform the industry.
Emerging sectors are developing rapidly, achieving both quantitative and qualitative increases. The company's emerging sector business grew rapidly in '23, with revenue increasing by nearly 30% year-on-year, accounting for +4.5pct. Among them, aerial work machinery revenue was +35.62%, ranking first in the aerial work platform and lift fire engine industry; revenue from mining machinery increased by +14.17%, of which new energy mining vehicles increased by 4 times, and the domestic mining market share increased by 1.7 pct; the company merged to establish a forklift division to strengthen internal collaboration, and revenue increased nearly 30%; agricultural machinery business gained a good reputation for differentiated technology and high reliability. Tractors and harvesters were delivered in batches, and revenue increased tenfold. In addition, the company's revenue for new energy products doubled and increased in 23 years, accounting for +5pct of revenue.
Profitability has increased dramatically, and the quality of operations has improved markedly. The company's gross profit margin and net profit margin in '23 were 22.38% and 5.64% respectively. The year-on-year ratio was +2.17pct and +1.06pct, respectively, mainly benefiting from structural optimization and cost reduction. The company's overseas gross margin in '23 was higher than domestic gross margin of 3.05 pct, and the share of overseas revenue increased by 10.42 pct compared to '22, driving up profitability; the company achieved continuous cost reduction by promoting supply chain restructuring and autonomous and controllable parts, etc., and domestic and overseas gross margins increased in 23 years, +1.84 pct and +1.88 pct, respectively. Profitability continued to increase in 24Q1, with gross margin +0.26pct yoy and net margin +0.11pct yoy. In addition, the company's operating quality has improved markedly. Net cash flow from operating activities increased sharply by 125.59% year on year in '23. Mainly accounts receivable and inventory pressure drop had remarkable results. The two pressure drops are expected to continue to advance in the future, and the company's operating quality is expected to continue to improve.
The domestic industry is expected to bottom out and stabilize this year. Domestic sales of excavators achieved positive year-on-year growth in March. CME estimates that domestic sales will remain flat in April, and the probability that the industry will bottom out and stay flat throughout the year will increase. The company's leading products, such as lifting machinery, earthmoving machinery, and concrete machinery, are expected to develop steadily. As international expansion continues to deepen, overseas revenue is expected to continue to rise. Combined with cost reduction and efficiency, and the two pressure drops will continue to advance, and the company's performance and profitability are expected to continue to improve. The company is expected to achieve net profit of 6.665 billion yuan and 9.165 billion yuan respectively in 2024-2025, corresponding to PE of 12 times and 9 times, respectively, maintaining a “buy” rating.
Risk warning
1. The implementation of the steady growth policy fell short of expectations, leading to a decline in the growth rate of infrastructure and real estate investment; 2. The decline in overseas market sentiment and changes in trade policies led to lower overseas expansion than expected.