1H22 performance is in line with previous forecasts
The company announced 1H22 results: revenue of 21.299 billion yuan, down 49.8% from the same period last year, and net profit of 1.716 billion yuan, down 64.6% from the same period last year. 2Q22's revenue was 11.288 billion yuan, down 51.8% from the same period last year, and the net profit from its mother was 809 million yuan, down 66.8% from the same period last year.
The demand for lifting and concrete equipment has dropped greatly. Affected by the drag of real estate, the income of 1H22 lifting appliances and concrete machinery was 98.19 billion yuan, down 56.7% from the same period last year. The income of earth-moving machinery and agricultural machinery was 1.476 billion yuan, down 26.3 percent from the same period last year, while that of other machinery and products was 3.969 billion yuan, down 7.1 percent from the same period last year, reflecting the strong demand resilience of aerial work platforms.
The gross profit margin decreased and the expense rate increased during the period. Affected by the decline in capacity utilization, 1H22/2Q22 's comprehensive gross profit margin decreased by 4.2/1.8ppt to 20.8% and 21.4% compared with the same period last year, of which the gross profit margin of 1H22 lifting machinery, concrete equipment and agricultural machinery decreased by 6.6/4.0/6.7ppt compared with the same period last year. Thanks to the improvement in sales structure, the gross profit margin of earth-moving machinery, other machinery and products increased by 2.1/2.3ppt.
During the period of 1H22/2Q22, the expense rate increased by 1.5% and 2.5% compared with the same period last year, and the net interest rate decreased by 3.4/3.2ppt. Affected by the decline in income, 1H22 has a net cash inflow of 1.857 billion yuan from operating activities, 2.272 billion yuan less than the same period last year.
Trend of development
Domestic real estate is a drag, and the year-on-year growth rate in 2022 is high before and after. According to the National Bureau of Statistics, investment in 1H22 real estate development fell 5.4 per cent year-on-year, and new housing starts fell 34.4 per cent year-on-year, with a monthly decline of more than 40 per cent from April to June. Affected by the drag of real estate, domestic demand for excavators, cranes, concrete equipment and other major categories are significantly downward, among which cranes and concrete equipment with higher correlation with real estate have a greater decline. Looking ahead, with the base rotation and the start of repair after the epidemic, we expect the year-on-year growth rate of industry sales in 2022 to show a low trend before and after a high trend.
Export demand will remain brisk in 2022. 1H22's overseas revenue was 3.886 billion yuan, an increase of 40.5% over the same period last year. The company has achieved good growth in key markets such as Indonesia, the United Arab Emirates, Saudi Arabia and Vietnam. Looking ahead, with the increase in the competitiveness of domestic mainframe manufacturers, we expect overseas markets to contribute to medium-and long-term growth potential in the future.
Profit forecast and valuation
Considering the sluggish downstream demand, we downgrade the 2022max 2023 EPS forecast of 26% to 0.37max 0.43 yuan. The current A share price corresponds to 2022 15.6x/13.4x 2023. The 8.1x/7.0x Pincus E share price corresponds to the H share price. Taking into account the decline in earnings, the expansion of valuation caused by the marginal improvement of the industry, and the valuation discount brought about by the weak liquidity of Hong Kong stocks, we lowered the target price of 17.2x/14.8x/ H by 8% to 6.41 yuan / HK $4.57, A shares corresponding to 2022 pm 2023 10.5x/9.0x P Rhyme E, and 10% to 29% upside space to maintain an industry rating that outperformed the industry.
Risk
The resumption of real estate starts is less than expected; overseas market demand is declining; and industry price competition is intensified.