Incidents. The company released its 2023 annual report and 2024 quarterly report on April 30. In 2023, the company achieved a total operating income of 92,848 billion yuan, -1.03% year-on-year; net profit to mother was 5.326 billion yuan, +23.51% year-on-year. 2024Q1, the company's total revenue was 24.174 billion yuan, +1.18% year-on-year; net profit to mother was 1,600 billion yuan, +5.06% year-on-year.
The company's profitability increased slightly, and the cost ratio remained stable. In 2023, the company's net profit resumed its upward trend. Gross sales margin and net margin were 22.38% and 5.64% respectively, up 2.17pct and 1.06pct year-on-year.
In terms of expenses, sales, management, and financial expenses were 6.702, 27.06 billion yuan, and 726 million yuan, respectively, with year-on-year changes of -0.93%, +18.44%, and +444.81%. Among them, significant changes in financial expenses were mainly affected by interest income and exchange gains and losses in 2023. The sales, management, and financial expense ratios were 7.22%, 2.91%, and 0.78%, respectively. The year-on-year changes were +0.01, +0.48, and +1.01 pct, and remained stable.
The company adheres to the “main strategy of internationalization” and leads products to the world. In recent years, the company has steadfastly implemented the internationalization strategy, deepened the national layout, and established an international business headquarters. In 2023, the company established 5 sales subsidiaries in the United Kingdom, Singapore and other countries. In the Yellow Table of the British KHL Group's world list, XCMG, with the company as the main body, ranked in the top three. The company is also the only Chinese construction machinery manufacturer to rank in the top three. In 2023, the company's overseas revenue totaled 37.220 billion yuan, +33.70% year-on-year, accounting for 40.09% of the company's total revenue, an increase of 10.42 pcts over the previous year.
Traditional industries are making steady progress, and infrastructure upgrades drive demand growth. The company is a highly competitive and influential enterprise in the construction machinery industry. In 2023, the traditional industry achieved an accelerated qualitative improvement, made up for shortcomings and energy efficiency in fierce market competition, and continued to be the company's pillar business. Among them, revenue from lifting machinery was 21.187 billion yuan, -11.20%; revenue from earthmoving machinery was 22.56 billion yuan, -4.56% year over year, mainly due to low domestic demand but high export growth; and revenue from concrete machinery was 10.425 billion yuan, +9.72% year over year. Gross profit margins all increased, with gross margins of hoisting machinery, earthmoving machinery, and concrete machinery increasing by 2.73, 0.37, and 1.72 pct, respectively. Among hoisting machinery products, all-ground and off-road crane exports both surpassed 200 units, and crawler crane companies continued to lead the industry in market share; concrete machinery promoted market, technology and capacity collaboration, and the production capacity of new energy mixers exceeded 1,000; and the market share of road machinery products steadily ranked first in the industry. The “Implementation Plan for Promoting the Renewal of Construction and Municipal Infrastructure Equipment” issued by the Ministry of Housing and Construction on March 27, 2024 encourages the renewal and purchase of intelligent construction equipment. Infrastructure equipment is about to be upgraded, and demand for construction machinery has increased dramatically. As a leading enterprise in the industry, the company will continue to develop its traditional main business in accordance with national policies.
Strategic emerging industries are increasing in quantity and quality, creating new perspectives. Strategic emerging industries are gaining momentum, contributing more than 20% to revenue. The company's aerial work platforms and mining machinery products both achieved high revenue growth in 2023.
The total revenue from aerial work platforms was 8.883 billion yuan, +35.62% year on year; revenue from mining machinery was 5.861 billion yuan, +14.17% year over year. In addition, the company's agricultural machinery has differentiated technology and high reliability in the industry. Tractors and harvesters are delivered in batches, and revenue has increased tenfold. Xugong Daojin, a holding subsidiary of the company, continues to deepen research on key core technologies and industrialization of special robots to provide technical and solution support for the company's intelligent transformation to digital connectivity.
Investment advice. The company promotes the “five modernizations” transformation and upgrading of high-end, intelligent, green, service and internationalization as the main line, focusing on the high-end transformation of the main business, while developing strategic emerging industries, penetrating the context of intelligent operation, promoting continuous growth in the company's performance from all aspects. The market position is stable, and the first coverage gave it an “additional rating”. We expect 2024-2026 net profit to be 66.43, 81.93, and 10.312 billion yuan, EPS 0.56, 0.69, 0.87 yuan, and PE 13.8, 11.2, and 8.9 times, respectively.
Risk warning: risk of economic fluctuations; risk of market competition; risk of supply chain security; risk of exchange rate fluctuations.