Key points of investment
The company is a leading domestic construction machinery company. In 2022, XCMG Machinery bought XCMG Limited in reverse, achieving the overall listing of XCMG Group's construction machinery division. After listing, the company's traditional advantage of lifting machinery remained strong, and its market share ranked first in the industry for many years; the competitiveness of high-margin products such as earthmoving machinery and concrete machinery increased; and businesses such as aerial work machinery and mining machinery accelerated. At the same time, the company has increased its sales efforts in overseas markets, with more than 300 overseas distributors. The share of high-margin products and the increase in the share of overseas business is expected to drive the company's profitability to continue to increase.
Industry situation: Demand for traditional construction machinery is expected to pick up. Mining equipment, etc. Traditional construction machinery products such as space cranes, concrete machinery, and earthmoving machinery are mainly affected by factors such as infrastructure investment and replacement after the national standard switch. Domestic demand has continued to decline since May 2021. The central government issued an additional 1 trillion yuan in treasury bonds in 2023Q4, which is expected to drive a gradual increase in equipment demand in 2024. China's aerial work platform market started late and developed rapidly in recent years. The growth rate of China's aerial work platform ownership in 2019-2022 was 65.4%/62.8%/57.0%/36.0%, respectively. It is expected that in the future, as labor costs increase, the industry is expected to maintain a high growth rate.
The global market space for mining equipment is vast, and the mining equipment market is expected to reach 130.8 billion US dollars in 2025.
Company advantages: Leading market position for core products, accelerated development of emerging potential businesses. The company's leading products such as lifting machinery, earthmoving machinery, and concrete machinery are in a leading position. The equipment renewal policy is expected to increase demand for the company's traditional products. The company's emerging businesses such as mining machinery and aerial work vehicles accelerated. Aerial work machinery quickly became the leading domestic company. In 2023, it ranked first among Chinese companies, with a global market share of about 5.3%; the company's mining machines ranked first in the country and fifth in the world. In 2019-2021, mining machine revenue rose from 1.35 billion yuan to 5.861 billion yuan, and the CAGR reached 44.35%. The rapid growth of emerging businesses brought space to the company.
High-quality asset injection & overseas business volume increase profitability and maintain the “purchase” rating. We expect the company's 2024-2026 revenue to be 103.408/116.164/130.646 billion yuan, with year-on-year growth rates of 11.37%/12.34%/12.47%, respectively, and net profit to mother of 6.563/8.281/10.775 billion yuan, respectively, with year-on-year growth rates of 23.22%/26.17%/30.12%, EPS 0.56/ 0.56/ 0.70/0.91 yuan/share, 3-year CAGR is 26.47%. The absolute valuation method measures the company's value per share of 8.87 yuan, which is 15.36 times the company's average valuation in 2024. Given the steady growth of the company's traditional businesses such as earthmoving machinery, new businesses such as mining machinery are expected to continue to expand, and the foreign business layout is gradually deepening. Combining the relative valuation method and the absolute valuation method, we maintain the company's “buy” rating.
Risk warning: risk of price fluctuation of raw materials, etc., risk of international trade, risk of deviation in industry space estimation