Mixed reform opens up a new situation and leads “Made in China” to the world:
The company started with loaders and has been deeply involved in the field of construction machinery for more than 60 years. It has nearly 30 product lines and a complete supporting service system to provide customers around the world with solutions for different operating conditions and effectively support the implementation of the company's “comprehensive solution” strategy.
Mixed ownership reform began in 2019. Liugong Group became the controlling shareholder of the company, and the actual controller was the Guangxi State-owned Assets Administration Commission; after completing the overall listing in 2022, the company continued to deepen and carry out a series of changes, making full use of both domestic and international market resources, and continued to achieve both revenue and profit growth since 2023. This year, Q1 revenue and net profit to mother were +1.88% and +58.03% year-on-year respectively.
The global construction machinery market is broad, and domestic manufacturers are opening up overseas expansion:
In the past, benefiting from the continuous impetus of the “Belt and Road”, China's construction machinery went overseas through engineering contracting. Currently, there is a clear trend of construction machinery going overseas independently. In 2022, China's construction machinery export value increased by 30.20% year on year to 44.302 billion US dollars. The overseas market maintained a high boom in 2023, with an export value of 48.552 billion US dollars. The overseas market has achieved remarkable results in overseas expansion; moreover, the overseas market has become one of the main growth drivers for the domestic construction machinery industry in the future. At the same time, the domestic construction machinery industry has bottomed out and rebounded. Domestic sales of excavators have been rising for 3 consecutive months since this year, and it is expected that the recovery trend will continue. The industry is expected to enter a stable recovery stage in 2024, and then enter a new upward channel.
The company develops and innovates to expand the product line, seize the opportunity to embark on a journey of internationalization:
1) The company has always insisted on innovation and continuous investment, formed a complete R&D system, and carried out multiple R&D projects to build the world's leading equipment manufacturing R&D strength and talent team; 2) The company actively laid out overseas markets. Overseas revenue increased from 2,017 billion yuan in 2016 to 11.462 billion yuan in 2023. The CAGR was 28.18% in 2016-2023, and overseas business revenue increased 41.18% year-on-year in 2023; 3) The company started with loader products, and electric loader sales increased in the first half of 2023 37%, maintaining absolute market share; in 2023, the market share of excavators exceeded 11%, an increase of 3 to 4 percentage points over the previous year; sugar cane harvesters are deeply integrated into the RCEP region and are widely used in China, Southeast Asia, West Asia, Central America and other regions; Liugong Ovim lays out prestressed machinery to lead the high-quality development of technology.
Profit forecast: We expect the company's 2024-2026 revenue to be 301.89, 354.05 billion yuan, and 42.102 billion yuan, respectively; Yoy's net profit to mother will be 14.25, 20.11 billion yuan, and 2,721 billion yuan, respectively; YOY will be +64.2%, +41.13%, and +35.31% respectively; covering and giving a “buy” rating for the first time.
Risk warning: policy risk, market risk, exchange rate risk, raw material price fluctuation risk, estimation is subjective risk, risk of globalization falling short of expectations, risk of electrification expansion falling short of expectations, etc.