Key points of investment
Globalization, digital intelligence, and decarbonization continue to deepen, helping the company to overtake cars in curves, gradually become a leading global company in domestic construction machinery, and gradually become a global leader. Globalization: In 2023, the company's overseas revenue was 43.3 billion yuan, up 18.3% year on year, accounting for more than 60% of the total revenue of the main business; overseas gross profit of 13.3 billion yuan, accounting for more than 67% of the total gross profit of the main business; overseas gross profit margin was 31%, up 4.4 pct year on year. According to KHL data, the company's global construction machinery market share in 2023 was 5.2%. The global leader Caterpillar is 16.3%, and Komatsu is 10.7%. The company has great potential in overseas markets. Digital intelligence: By the end of 2023, 33 lighthouse factories had been put into operation. Production efficiency improved significantly, and the proportion of production personnel continued to decline. Decarbonization: With the gradual accumulation of favorable factors such as technology, policies and application scenarios, the revenue growth rate of electric products exceeded 200% in 2022, continuing to lead the upgrading of electrification.
Overseas business is expanding rapidly, and the domestic market is gaining momentum. The leading construction machinery industry is gradually climbing the entire industrial layout of World Summit Company covering the fields of concrete machinery, excavation machinery, lifting machinery, etc., and has completed 5 overseas production capacity layouts. Driven by rising domestic demand, the company's revenue in 2020 exceeded 100 billion dollars. The revenue CAGR in 2016-2021 reached 36%, and the net profit CAGR to mother reached 126%. Overseas development entered the fast track in 2021. Overseas revenue CAGR reached 45% in 2020-2023, effectively smoothing the downward impact of the domestic cycle. With the rapid expansion of overseas business, domestic demand bottomed out and improved, and the company's performance was highly flexible.
The overseas market share of the construction machinery industry is expected to continue to rise, domestic demand is bottoming out, and demand for renewal is gradually rising.
The overseas excavator market share of leading companies was generally low in 2024. Based on the strong layout in the early stages, overseas countries have the potential to achieve relatively rapid growth, and they continue to be optimistic that their overseas market share will continue to increase. In March 2024, the cumulative investment in real estate development and the cumulative area of new construction fell 9.5% and 27.8% year on year, and is expected to gradually stabilize. The cumulative increase in mining investment was 32.9% year on year, maintaining a relatively rapid growth rate. The cumulative increase in infrastructure investment was 8.75% year on year, continuing to remain high. Domestic downstream demand improved marginally as favorable policies such as trillion-dollar treasury bonds, real estate deregulation, and urban village renovation continued to accumulate. Based on estimates of the 8-10 year peak renewal period for excavators, domestic updates are expected to gradually improve in 2024. On March 27, the Ministry of Housing and Construction issued a document proposing to upgrade and eliminate construction machinery and equipment that has been used for more than 10 years. Domestic demand and renewal policies are both beneficial, and the construction machinery renewal cycle represented by excavators is expected to accelerate.
The excavator is the core engine, and the market share is stable; concrete remains in the lead; late generation of cranes grew rapidly; excavator revenue in 2023 accounted for 38% of total revenue, and gross profit accounted for 45% of total gross profit, which is the core driving engine for the company's performance. In 2015-2023, the company maintained the lead in overall excavator revenue and gross margin, and has been the champion in sales for 13 years since 2011. Concrete machinery is a traditional dominant business. In 2023, revenue accounted for 21% of total revenue, gross profit accounted for 17% of total gross profit, and continued to lead in revenue scale. Crane machinery is developing rapidly and is at the forefront. Revenue and gross profit in 2023 account for 18% and 16% of total revenue and gross profit, respectively.
Profit forecast and valuation: Net profit due to mother for 2024-2026 is expected to be 61,81,10.3 billion yuan, up 35%, 32%, and 27% year-on-year. The PE corresponding to the current stock price is 24, 18, and 14 times. Maintain a buy rating.
Risk warning: Real estate and infrastructure demand recovery falls short of expectations; overseas exports fall short of expectations; raw materials fluctuate.