Benefiting from the growth of industry prosperity and financial investment income, the company's profit in 2020 increased by 19.2% compared with the same period last year.
The construction machinery industry has strong sales from January to February, raising the company's profit forecast for 21-22 by 9-11%.
Raise the company's target price to HK $3.2 and maintain a neutral rating, taking into account the company's loader-based product structure.
Profit in 2020 increased by 19.2% over the same period last year
The company's 2020 revenue rose 9.7 per cent year-on-year to 12.88 billion yuan, while net profit rose 19.2 per cent to 1.96 billion yuan, exceeding our and market expectations of 19 per cent and 32 per cent. The main reasons for the higher-than-expected net profit are: 1) the revenue exceeded our expectations by 7%, the company's sales rebounded in the second half of last year, and the sales of loaders / excavators / forklifts increased by 7.4%, 8.3% and 18.2% respectively compared with the same period last year. Revenue increased by 4.3%, 13.8%, 14.2%, 2) the sharp increase in investment income on financial assets was the main reason why the company's net profit exceeded expectations last year. The company's comprehensive gross profit margin decreased by 0.5 percentage point year-on-year to 23.4%, of which loader / excavator / forklift gross profit margin was-1.4% prime 0.9% 2.7% to 28.7% soybean 21.0% 17.6% respectively. The company intends to pay a dividend of HK $0.33 per share, corresponding to a dividend payout ratio of 61% (2019: 59%).
Benefit from the prosperity of the industry, strong sales in the first quarter
The construction machinery industry ushered in a high scene at the beginning of this year, driven by downstream construction on the one hand and low base last year on the other. According to CCMA data, the sales of loaders / excavators / forklifts in major enterprises across the country increased by 72% from January to February this year compared with the same period last year. According to the guidance of the management, the company aims to continue to consolidate the absolute first position in the loader market in 2021, with forklift sales of more than 72000 units (up 18% year-on-year) and exports growing by more than 50% year-on-year. The company is expected to benefit from the prosperity of the industry as a whole. We raised the company's profit forecast for 2021-22 by 9-11%, mainly based on better-than-expected sales last year and high prosperity in the industry this year.
Lack of enterprising product structure, maintain the company's neutral rating
Based on the new 2021 earnings forecast, we raise the valuation multiplier by 10% to 7.3 times the 2021 forecast price / earnings ratio to reflect the industry's outlook and raise the company's target price to HK $3.2 in combination with changes in the Hong Kong dollar / RMB exchange rate. Although the company benefits from the prosperity of the whole industry, in terms of product structure, the company is relatively cautious and conservative in the expansion of product structure, in which superior product loaders account for nearly half of the company's revenue. in this cycle, the sales growth rate of loaders is slower than that of products such as excavators, and the level of gross profit margin has also declined. In addition, the company started late in the large excavator market with high gross margin, and faced with great market competition, it is difficult to share the dividend of this round of excavator market to a large extent. Maintain the company's neutral rating.
