Key events
The company released its 2023 annual report and 2024 quarterly report: in 2023, the company achieved revenue of 47.075 billion yuan, +13.08%; net profit to mother of 3,506 billion yuan, +52.04% year over year; net profit after deduction of 2,708 billion yuan, +109.51% year on year; weighted average return on net assets of 6.41%, +2.28pct year on year. The company plans to distribute a cash dividend of 3.20 yuan (tax included) for 10 shares. In the first quarter of 2024, the company achieved revenue of 11.773 billion yuan, +12.93% year on year; net profit to mother of 916 million yuan, +13.06% year on year; weighted average return on net assets of 1.62%, +0.14pct year on year.
Domestic demand in the industry bottomed out and stabilized in 2024. As the company was the first to benefit from a high-quality domestic machine manufacturer, the construction machinery industry has entered this downward cycle since 2021. Combining macro-level infrastructure, real estate, and industry-level equipment upgrades and environmental emissions, we believe that the construction machinery industry is expected to recover steadily in 2024.
The company was founded in 1992 and has been deeply involved in the construction machinery industry for many years. Through many acquisitions, the company has not only broadened the product chain matrix and improved the business industry chain, but also integrated high-quality resources from overseas industries. Currently, the company's main products include concrete machinery, lifting machinery, earthwork machinery, aerial work machinery, mining machinery, pile construction machinery, agricultural machinery, fire fighting machinery, forklifts, etc. At the same time, the company values shareholder returns and maintains a high dividend policy. We believe that when industry demand improves, Zoomlion Heavy Industries is expected to be the first to benefit as a leading domestic high-quality machine manufacturer.
Internationalization+emerging business+internal quality and efficiency have significantly improved profitability. The company has been deeply involved in the industry for many years, has strong competitiveness through cycles, and its alpha attributes continue to stand out. Looking ahead, the company still has high growth potential, mainly due to: 1) Continued internationalization. Since 2001, the company has taken steps towards internationalization, accelerating its global layout through mergers and acquisitions, overseas factory construction, and the establishment of overseas subsidiaries. With direct access to the market and users as the starting point, the company pioneered disruptive innovation in the industry and built a unique global direct sales business system based on “end-to-end, digitalization and localization”. While helping the company's business grow rapidly, it also strongly supports its global end-to-end risk management. By the end of 2023, the company had more than 30 first-level business airports and more than 350 second-level outlets worldwide, and its products covered more than 140 countries and regions. The company's overseas business continued to break through new highs, and the company's overseas revenue increased by more than 79.2% year-on-year in 2023.
2) Emerging businesses are developing rapidly, and earthwork+high-altitude machinery+agricultural machinery+mining machinery continue to break through. Among them, earthmoving machinery has strengthened medium and large excavation product models and accelerated the improvement of the electric product series. The market share of CUHK has entered the top three domestic brands; the market share of small and medium-sized customers in the domestic market for aerial work machinery ranks first, and the export amount ranks second among Chinese brands; agricultural machinery has continuously increased resource investment, focusing on tractors and staple food harvesting machinery, and has achieved full coverage of major models; mining machines focus on the open pit mining market, and are speeding up market expansion and team building. The first 100-ton nationally produced electric transmission dump truck developed independently has officially entered the high-end market. 3) Accelerate digital transformation and improve internal quality and efficiency. The company empowers business development and accelerates the construction of digital systems through the application of core technologies such as the Internet of Things, 5G, cloud computing, big data, and artificial intelligence. The company's R&D investment in digital transformation has exceeded 5 billion yuan, independently incubated the national industrial Internet platform Zhongke Yungu, and opened up R&D, production, supply chain, marketing, service, finance, management, upstream and downstream of the industrial chain, etc., and has achieved digital control of the entire enterprise process, enabling cost reduction and efficiency.
Investment advice
We are optimistic about the continued development of various products of Zoomlion Heavy Industries in domestic and overseas markets. We expect the company to achieve revenue of 566.34/666.96/77.785 billion yuan in 2024-2026, up 20.3%/17.8%/16.6% year on year; achieve net profit of 42.86/53.79/6.891 billion yuan, up 22.3%/25.5%/28.1% year on year; EPS corresponding to 2024-2026 is 0.49/0.62/0.79 yuan. The PE corresponding to the company's current stock price is 16/13/10 times. First coverage, giving a “buy” rating.
Risk warning
1) Domestic industry demand falls short of expectations; 2) Overseas market expansion falls short of expectations; 3) Accounts receivable recovery risk becomes bad debt preparation; 4) Industry competition intensifies.