We have built up our wealth to become a leader in high-end CNC machine tools in China. Using the CNC gantry machining center as the starting point, the company gradually expanded its business to various categories of metal cutting machine tools, and achieved steady growth in various businesses over the years. Relying on Haitian Group's strong resources and technical background, the company makes full use of the synergy within the group to promote rapid development of its own business.
Due to the resonance of multiple factors, the machine tool industry is expected to usher in a boom recovery. Machine tools, known as “machine tools,” are the foundation of modern manufacturing and an important sign of a country's industrial development. The development of the machine tool industry is closely related to the macroeconomic environment and manufacturing boom. Currently, global machine tool output has returned to pre-pandemic highs. China is the world's largest machine tool production and consumer market. In 2023, China's machine tool output value reached 25.3 billion euros, accounting for 31% of the global machine tool output value; China's machine tool consumption was 23.7 billion euros, accounting for 29% of global machine tool consumption. China's machine tool industry as a whole still shows the characteristics of “big but not strong”: there is a lot of room for CNC improvement of machine tools, and there is huge room for import substitution of high-end machine tools; the machine tool industry has achieved a trade surplus, but the supply and demand structure does not match, and high-end metal cutting machine tools still need to be partially imported; there is a certain gap between the core components of domestic CNC machine tools and the international advanced level. In addition, the machine tool equipment renewal cycle is 8-10 years. The machine tool industry is expected to usher in a new round of recovery by matching the peak of machine tool production in the previous round, combined with a new round of inventory cycles for finished industrial products and large-scale equipment renewal policies.
High-end new products are introduced repeatedly, and downstream new technology applications are comprehensively laid out. The company maintains an industry-leading position in the field of gantry machining centers, while continuously expanding product lines such as horizontal machining centers, vertical machining centers, CNC machine tools, etc., and the market ceiling continues to rise. The company actively grasps the incremental demand driven by new technologies such as integrated die casting, increases production capacity in a timely manner according to the cycle, and launches one-stop solutions for the application of new technologies.
The synergy effect has been highlighted, and overseas business has achieved high growth. Haitian International, a subsidiary of the Group, is a leading international injection molding machine manufacturer and has been investing and deploying overseas for a long time. The products are sold to more than 130 countries and regions, and it has a mature path and first-mover advantage in overseas market development. The company is expected to draw on the overseas market expansion experience of brother companies to speed up the pace of going overseas. The company's overseas business has achieved rapid growth in recent years. International business revenue increased from 0.016 billion yuan to 0.594 billion yuan in 2015-2023, with a CAGR of 57%.
Investment advice: We expect the company's revenue for 2024-2026 to be 3.61, 4.3, and 5.14 billion yuan; net profit to mother of 0.66, 0.804, and 0.985 billion yuan respectively; and EPS of 1.26, 1.54, and 1.89 billion yuan respectively. Considering the company's leading position in domestic high-end CNC machine tools and the excellent results of overseas market expansion, the company was given 22 times PE in 2024, with a corresponding target price of 27.7 yuan. For the first time, coverage was given, and a “strong promotion” rating was given.
Risk warning: Downstream demand weakens due to macroeconomic fluctuations; overseas market expansion falls short of expectations; expansion of new energy products falls short of expectations; decline in profitability due to increased market competition, etc.