Incident: On December 2, the company announced that it plans to repurchase shares through centralized bidding transactions to implement employee stock ownership plans or share incentives; the repurchase amount is not less than 0.3 billion yuan (inclusive) and not more than 0.6 billion yuan (inclusive), the repurchase price is not more than 18.20 yuan/share, and the repurchase period is within 12 months. The estimated number of shares that can be repurchased accounts for about 0.82% to 1.64% of the company's total share capital. The source of funding is the company's own capital and special loan funds for stock repurchases, and it has obtained a “Loan Commitment Letter” issued by the Guangxi Branch of the Industrial and Commercial Bank of China, promising to provide special loan support for the company's current repurchase. The loan amount does not exceed 0.42 billion yuan, and the loan interest rate is 1.96%, and the term is 1 year.

This is the company's second repurchase in the year:

The company issued a repurchase announcement in March of this year for the new share incentive or employee stock ownership plan; the repurchase amount range is not less than RMB 0.1 billion (inclusive) and not more than RMB 0.2 billion (inclusive), and the maximum repurchase price is not more than RMB 10 yuan/share. It is estimated that the number of shares that can be repurchased will account for about 0.51% to 1.03% of the company's total share capital at the time. The two repurchases fully demonstrated the company's firm confidence in future high-quality sustainable development and long-term steady growth in intrinsic value.

Protect investors' interests without early redemption of convertible bonds:

The company announced in October that it would not exercise the early redemption right of “Liugong Transfer 2” for the time being and that “Liugong Transfer 2” will not be redeemed early; at the same time, it was decided that within 12 months after review and approval by the board of directors (that is, October 11, 2024 to October 10, 2025), if the above conditional redemption clause of “Liugong Transfer 2” is triggered again, the company will not exercise the right of early redemption to fully protect investors' interests.

Adhere to sustainable high-quality development and steadily promote internationalization:

The company's product+solution market strategy was thoroughly implemented in the first half of the year. The advantages of Liugong's product portfolio+comprehensive solutions continued to improve, and revenue scale increased by nearly 20% year on year; the company was guided by important regional market needs, made regional and product structural adjustments according to local conditions, and value chain profits continued to reach new highs. Overseas gross margin reached 29.09% in the first half of the year, YOY+1.12pct, far higher than the domestic gross profit margin of 18.15%.

The company coordinates both domestic and international markets, construction machinery and non-construction machinery business, strong cycle business and weak cycle business, advantageous business and new business, complete machine business and key components business, etc., and achieved steady growth in performance.

Profit forecast:

We expect the company's net profit to be 1.58, 2.23, and 3 billion yuan respectively in 2024-2026. Yoy will be +82.0%, +41.0%, and +34.7%, respectively, and the corresponding PE will be 14.2, 10.0, and 7.5 times; we continue to recommend and maintain the “buy” rating.

Risk warning: policy risk, market risk, exchange rate risk, raw material price fluctuation risk, the company's international expansion falls short of expectations, etc.