I. Incident Overview
On March 22, the company released its 2020 annual report. The company achieved annual revenue of 9.38 billion yuan, an increase of 26.3% over the previous year, and Guimu's net profit was 570 million yuan, an increase of 12.35% over the previous year.
II. Analysis and Judgment
Actively promoting product development and marketing to achieve contrarian growth under the pandemic, the company achieved revenue of 9.38 billion yuan in 2020, an increase of 26.3% over the previous year; Guimu's net profit was 570 million yuan, an increase of 12.4% over the previous year.
During the reporting period, the operating income of excavating machinery and pile-working machinery increased by more than 40% over the same period last year. The main reasons for the steady increase in the company's performance include: 1) Under the sudden global COVID-19 pandemic in 2020 and the complex and changing economic environment at home and abroad, the company took measures to respond positively, insisted on “pioneering innovation” development, and continued to promote product development and enhance the core competitiveness of the product; 2) increasing the online marketing model for construction machinery products, which led to a rapid increase in product sales. In 2020, the company's construction machinery sector revenue increased 41.6% year on year, and profit increased by more than 70.5% year on year; 3) Canadian subsidiary AVMAX closely followed changes in market demand and took various measures to implement Strict cost control ensures the stability of the company's operating cash flow and strives to reduce the impact of adverse factors brought about by the epidemic. The company is a leader in underground engineering equipment. In the context of industry recovery, the two core products, excavation machinery and pile-working machinery, have achieved rapid growth. With the continuous improvement of the core competitiveness of the company's products and the gradual improvement of marketing channels and cost control systems, the penetration rate is expected to grow rapidly in the future.
The resumption of work and production is progressing steadily, and policies are adding to the high level of industry prosperity
In 2020, the construction machinery industry was affected by the epidemic and sales were under pressure in January and February. As the resumption of work and production progressed in an orderly manner in various regions in March, domestic investment and major projects started one after another, and countercyclical adjustment policies continued to increase, demand for various types of construction machinery products increased in downstream industries such as real estate development and infrastructure construction. Moreover, with the support of national policies such as tax reduction and fee reduction, enterprise support, and stable employment, the industry's production stabilized and improved throughout the year. The economy was at a high level. Sales of various products increased year-on-year. The national infrastructure investment for the full year of 2020 was about 19 trillion yuan, an increase of 3.4% over the previous year; investment completed in real estate development was about 14 trillion yuan, an increase of 7% over the previous year. The industry exceeded expectations, and the company's annual excavator production increased 75.6% year on year. Benefiting from macroeconomic policy adjustments and demand from downstream industries such as infrastructure, the construction machinery industry has maintained a high boom, and the company, as a leader in underground engineering equipment, is expected to achieve a better growth rate than the industry.
Repayments have been accelerated, and operational efficiency has been steadily improved
The net cash flow from the company's operating activities in 2020 was about 1.8 billion dollars, an increase of 144.6% over the previous year, mainly due to the increase in repayments in the current period; in 2002, the cash received by the company from sales of goods and services accounted for 97.5% of revenue, an increase of 3.8 percentage points over the previous year; in 2020, the company's inventory turnover ratio and revenue account turnover ratio were 2.6 times and 2.5 times respectively, up 0.6 and 0.3 times from 2019, respectively. The company's operating efficiency has improved compared to last year. The construction machinery industry is cyclical. As the company's market penetration rate continues to increase and management efficiency continues to improve, the company's ability to cope with the cyclical nature of the industry will gradually increase.
III. Investment Suggestions
It is estimated that in 2021-2023, the company will achieve revenue of 121.9/152.4/17.52 billion yuan, and achieve net profit of 87/1,07/1.25 billion yuan. The current stock price corresponding to PE is 12/9/8 times. The company's valuation in 2021 is about 12 times, and the industry valuation center is about 15 times. Considering the high prosperity of the construction machinery industry, the company has been deeply involved in the construction machinery industry for many years. The certainty of performance and sales volume is strong. Valuation repairs can be expected. First coverage is given, and a “recommended” rating is given.
4. Risk Reminder:
Domestic macroeconomic fluctuations, market share increases falling short of expectations, and fluctuations in raw material prices affect profitability.