Core views

2024Q3's revenue continues to grow rapidly, with a year-on-year increase of about 12%. It is expected that both domestic and foreign revenue will perform well. Profit growth of nearly 60% is far higher than the revenue growth rate. It mainly benefits from the increase in overseas revenue share and internal cost reduction and efficiency. Profitability continues to improve. As the reform of state-owned enterprises continues to advance, it is expected that the company's profit flexibility will continue to be unleashed.

In the medium to long term, the core advantages of the company's earthwork machinery will continue to be maintained. The company will continue to expand overseas markets using its combo advantage. Furthermore, small categories such as forklifts, agricultural machinery, and high machinery are expected to achieve good growth, contributing to the company's growth.

occurrences

In the first three quarters of 2024, the company's revenue was 22.856 billion yuan, up 8.25% year on year; net profit to mother was 1.321 billion yuan, up 59.82% year on year; net profit after deducting non-return to mother was 12.0.9 billion yuan, up 93.89% year on year.

Q3 revenue in a single quarter was 6.796 billion yuan, up 11.81% year on year; net profit to mother was 0.337 billion yuan, up 58.74% year on year; net profit after deducting non-return to mother was 0.307 billion yuan, up 200.61% year on year.

Brief review

Q3 revenue maintained a high growth rate. The profit growth rate was much higher than the revenue growth rate. On the revenue side, in the first three quarters of 2024, the company achieved revenue of 22.856 billion yuan, an increase of 8.25% year on year; in a single quarter, 2024Q3 achieved revenue of 6.796 billion yuan, an increase of 11.81% year on year. The growth rate was faster than in the first half of the year, maintaining a high growth rate. Overall, domestic sales in the excavator and loader industry in Q3 achieved positive year-on-year growth. We expect the company's domestic and overseas revenue to grow relatively well. In terms of profitability, gross profit margin for the first three quarters of 2024 was 23.48%, up 2.84 pct year on year; net profit margin was 5.94%, up 2.00 pct year on year; Q3 gross profit margin was 23.67%, up 1.75 pct year on year; net profit margin was 5.02%, up 1.52 pct year on year. Both gross profit margin and net interest rate achieved relatively good growth, mainly benefiting from the increase in the share of overseas revenue with higher profit margins. Furthermore, as the company's state-owned enterprise reform progressed, internal cost reduction effects were reflected. When it comes down to the profit side, net profit for the first three quarters of 2024 was 13.2.1 billion yuan, up 59.82% year on year; Q3 single quarter net profit was 0.337 billion yuan, up 58.74% year on year. The profit growth rate is much higher than the revenue growth rate. It is expected that as the reform of state-owned enterprises continues to deepen, the company's profit flexibility will still be unleashed in the future.

Earthmoving machinery is in a stable position, focusing on the company's breakthroughs in overseas markets and small categories

The company is an established construction machinery leader. In the field of earthmoving machinery in particular, loaders have strong competitive strength. In recent years, it has continued to consolidate the core advantages of earthmoving machinery, accelerate breakthroughs in post-market segments and electrified products, and form a combined marketing solution with a strong competitive advantage; with mature markets as the foundation, it continues to expand vigorously into new markets. The two major products of loaders and excavators have maintained steady growth. Small construction machinery, mining trucks, truck cranes, and aerial machinery have all achieved rapid growth. At the level of market layout, the company has had an international layout for more than 20 years and has entered a deep stage of internationalization. In recent years, the company has strengthened regional market supply capacity, improved the number of dealer outlets and network coverage, and maintained good growth in the accessories and service sector. It has become a strong new growth pole for overseas business, and is optimistic about the company's future expansion and progress in overseas business. At the level of business layout, the company has expanded horizontally and vertically, and non-cyclical business performance such as agricultural machinery and prestress is worth looking forward to, which is expected to drive long-term steady growth in the company's overall performance. Furthermore, new products continue to help increase market share, and electrification products continue to achieve breakthroughs in markets such as Asia Pacific and Northern Europe.

Investment advice

The company is expected to achieve revenue of 30.131, 34.843, and 40.343 billion yuan respectively in 2024-2026, up 9.49%, 15.64%, and 15.79% year on year; net profit to mother is 1.61, 2.241, and 2.882 billion yuan, respectively, up 85.49%, 39.23%, and 28.59% year over year, corresponding PE is 14.75x, 10.60x, and 8.24x respectively, maintaining the “buy” rating.

Risk analysis

(1) Risk of macroeconomic fluctuations: The construction machinery industry to which the company belongs is closely related to macroeconomics. The complexity of macroeconomic operations and the uncertainty of national economic policies may cause fluctuations in the development of the industry.

(2) Supply chain security risks: Some of the company's key components and materials have a long procurement cycle. The impact of emergencies will present challenges to the supply chain. Production capacity and transportation of some material and component suppliers are limited, and supply chain safety and operating costs face a certain degree of risk.

(3) Risk of exchange rate fluctuations: The company is increasing its expansion of overseas product markets and is mostly calculated in the invested country's currency or US dollar. Affected by the complex international situation, future overseas markets and exchange rate trends are uncertain, which will have a great impact on the company's earnings.