Revenue is expected to reach 34.6 billion yuan in 2025, and the net sales margin will increase by more than 1 percentage point. On December 27, Liugong issued an announcement stating that the company reviewed and approved the company's 2025 financial budget: the company's 2025 budget revenue was 34.6 billion yuan, and the net sales interest rate increased by more than 1 percentage point. According to our 2024 performance forecast (revenue of about 30 billion yuan, profit of about 1.55 billion yuan), we can calculate that the company's revenue side is expected to grow 15% in 2025, with a profit margin of about 6%, and net profit of about 2.1 billion yuan, a year-on-year growth rate of about 35%. We judge that Liugong will still be one of the fastest growing companies in the construction machinery sector in 2025. Compared with other construction machinery leaders, there is still a lot of room for improvement in performance growth. The company's decision to include the 2025 performance target in the board of directors resolution also shows confidence in the company's high performance growth. It is expected that multiple efforts will be made to guarantee performance growth from the supply side, production side, and product structure side.

The second repurchase is used for equity incentives, and long-term stock prices are supported and performance is guaranteed. On December 19, the company issued a second share repurchase announcement, stating that the company plans to use its own funds and special loan funds for stock repurchase to repurchase part of the company's shares through centralized bidding. The total repurchase amount is not less than 0.3 billion yuan and no more than 0.6 billion yuan. This is the second time this year that the company has implemented a repurchase, demonstrating the company's confidence in long-term development and ensuring the sustainability of performance.

Mixed reforms improve the quality of operations, and equity incentives+fixed increases strengthen competitiveness. In 2022, the company completed mixed reform and achieved overall listing. After the mixed reform was completed, equity incentives and fixed increases were issued one after another to effectively expand production capacity, upgrade smart factories, stimulate employee enthusiasm, and greatly enhance overall competitiveness: ① Equity incentives:

974 executives and core technical personnel were tied in. The performance assessment indicators focused on the quality of operations and demonstrated the company's confidence in development. ② Fixed increase: Issuance of convertible bonds to raise 3 billion yuan for factory upgrades, component capacity expansion, and “three modernization” research and development. After the excavator project is put into operation, the factory will be upgraded to a smart factory and the production capacity of medium and large excavators will double; after the loader project is put into operation, large-scale loaders will be arranged to enhance competitiveness; after the new Zhongyuan Hydraulic Business plant is fully put into operation, the production capacity of hydraulic components will expand dramatically, and the increase in component autonomy will help reduce costs and increase efficiency, and the overall competitiveness will be further enhanced. Furthermore, on October 10, 2024, the company issued an announcement stating that within the next year (that is, October 11, 2024 to October 10, 2025), the company will not exercise the right to early redeem convertible bonds, demonstrating the company's confidence in long-term development.

Profit forecast and investment rating: We maintain the company's 2024-2026 net profit forecast value of 1.569/2.107/2.893 billion yuan, and the PE corresponding to the current market value is 15/11/8x, respectively, to maintain a “buy” rating.

Risk warning: Policies fall short of expectations, overseas trips fall short of expectations, domestic industry recovery falls short of expectations.