[Investment points
A leading domestic loader, the international & expanding category began a new journey. The company was founded in 1958, started with loaders and has established a leading position in the industry. After 2000, the company began to expand its product range, laying out products such as excavators, cranes, pavement machinery and related parts horizontally. During the industry downturn from 2022 to 2023, the company carried out multi-category and international expansion, actively laid out emerging sectors such as aerial work machinery and lifting machinery, and increased international expansion efforts to hedge against the domestic downturn cycle. Overseas revenue accounted for 42% in 2023. By the end of 2023, the company had become a leading international construction machinery enterprise with the largest share of loaders in the domestic market and a full range of categories. The company's revenue/net profit in 2023 was 27.52/870 million yuan, +3.9%/+44.9% YoY; 2015-2023 CAGR was 20.1%/59.2%. Supported by breakthroughs in internationalization and cost reduction and efficiency after mixed reform, the compound annual growth rate of the company's net profit far exceeds the revenue growth rate. 2024Q1's profitability further improved, with gross sales margin/net margin of 22.8%/6.5%, respectively, and +4.0/2.3 pct year-on-year, respectively.
Leading the global loader electrification process, the excavator channel transformation bucked the trend, and the growth of the core categories of loaders and excavators is prominent: ① Loaders: The downstream application scenarios of loaders and excavators are mainly steel mills, mines, logistics, ports, etc., with fixed work locations, relatively concentrated equipment, and less difficult to build charging stations. At the same time, electric loaders have strong environmental properties, low life cycle costs, and strong economy. Easy charging+low cost The domestic penetration rate of electric equipment is increasing rapidly. The 2024M4 sold 940 electric loaders in China, with a penetration rate of 18%, compared to +14pct. In the long run, the domestic electric equipment penetration rate is expected to reach 80%. The company started with loaders. After more than 50 years of accumulation and accumulation, the loader market share exceeded 20% in 2023, ranking first in the industry. Moreover, the company's electrified loader layout was early, with a market share of 30% + in Denso in 2023. As a leader in the electrical equipment industry, the company is expected to fully benefit from the increase in electrification penetration rate. ② Excavator: In 2022, the company carried out forward-looking channel changes to maintain product prices, boost channel confidence, meet the early recovery trend of domestic small mining during the downturn of the industry, and achieve a contrarian increase in market share. In 2023, the company's excavator market share was 11%, up 3-4 pcts year-on-year. Looking forward to the future, the company's channel advantage in the excavator field is already basically stable, and the advance layout of the four national products has a cost advantage, waiting for the domestic upward inflection point to arrive.
The mixed reform greatly improved the quality of operations, and equity incentives & convertible bonds enhanced overall competitiveness. In 2022, the company completed the mixed reform and achieved an overall listing. After the completion of the mixed reform, equity incentives and convertible bonds were issued one after another to expand production capacity, upgrade smart factories, stimulate employee enthusiasm, and the comprehensive competitiveness was greatly enhanced:
① Equity incentives: Connect 974 executives and core technical personnel. The performance assessment indicators focus on business quality. The target is that the company's ROE should not be less than 6.0%, 6.5% and 7.0% in 2024-2026, demonstrating the company's confidence in development. ② Convertible bonds of 3 billion yuan are used 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.
Profit forecast and investment rating: The company is a leading domestic earthwork machinery company. After the mixed reform, it began a new journey of internationalization and category expansion. We predict that the company's net profit for 2024-2026 will be 1,46/19.4/2.73 billion yuan, respectively. The current market value corresponding to 2024 to 2026 PE will be 15/11/8 times, respectively, and for the first time, we have given a “buy” rating.
Risk warning: Domestic industry demand recovery falls short of expectations, industry competition intensifies, and overseas trips fall short of expectations.