\u3000\u3000 Xcmg Construction Machinery Co.Ltd(000425) (000425)
Event: on January 25, the company released the performance forecast for 2021, which is expected to realize a net profit attributable to the parent company of 5.5 ~ 6 billion yuan, with a year-on-year increase of 47.5% ~ 60.9%; In the fourth quarter alone, the net profit attributable to the parent company is expected to reach 890 ~ 1.39 billion yuan, with a year-on-year increase of – 31.2% ~ 7.4%.
Core view: performance meets expectations. The mixed reform at the level of controlling shareholders of the company has been fully implemented, and an employee stock ownership platform has been established to realize the unity of the interests of the company, shareholders and employees. In 2021, in the stage of industry adjustment, the company still maintained strong business vitality, steadily increased revenue and improved profitability. Looking forward to the future, the company still has some room for profit improvement. On the one hand, the company attaches importance to cost reduction and will continue to optimize the cost of R & D, design, manufacturing and other links; On the other hand, the overall listing will inject high gross profit assets such as excavator and tower crane into the company and optimize the product structure. We believe that after the overall listing is completed in the future, the elasticity of the company’s revenue and profit is expected to be further enhanced.
The implementation of mixed ownership reform at the shareholder level and the continuous deepening of system reform at the listed company level to stimulate business vitality: in June 2020, the mixed ownership reform project of XCMG Co., Ltd. was publicly listed; In September 2020, XCMG completed the equity transfer of mixed reform and capital increase project of war investment, and established an employee stock ownership platform; In April 2021, the listed company planned to absorb and merge XCMG Co., Ltd. and planned to realize the overall listing of construction machinery assets. So far, the mixed reform at the level of Xcmg Construction Machinery Co.Ltd(000425) controlling shareholders has been fully implemented, and the subsequent company will continue to deepen the market-oriented reform of management system and incentive mechanism, such as the reward mechanism of multi contribution and multi income, the professional manager system of competitive employment, etc. we expect that the effectiveness of the reform of system and mechanism will be first reflected in the increase of per capita salary and the treatment of individual executives, From a long-term perspective, it will greatly stimulate the overall business vitality of the company.
We expect that the company has great room for profit improvement: ① to implement the new concept of “three high and one can”, one of the focus of the company’s work is to reduce the cost. In terms of profit margin, the gross profit margin of XCMG, Sany and Zoomlion in 2020 were 17.1%, 29.8% and 28.6% respectively, and the net profit margin was 5.1%, 16.0% and 11.3% respectively. The expense rate during the period was 10.0%, 12.9% and 14.6% respectively. XCMG’s profit level was lower than that of Sany and Zoomlion, but the expense control statement was better. Therefore, we believe that the main factor of the difference in profit performance lies in the cost side, from R & D Considering the whole process of design and manufacturing, the company has a large space for cost optimization; ② Overall listing, injecting high gross profit assets and optimizing product structure. XCMG Co., Ltd. includes the main construction machinery assets of the group, with an overall revenue of 102.59 billion in 2020. According to the bond prospectus of XCMG Co., Ltd., unlisted assets mainly include XCMG excavator, XCMG Construction Engineering (tower crane), XCMG Shi Weiying (concrete machinery) and XCMG mining machinery. In 2020, the revenue will be RMB 23.1 billion, RMB 6.1 billion and RMB 2.8 billion respectively, and the gross profit margins of its related businesses such as excavator, tower crane, concrete and mining card are 31.5%, 24.6%, 14.6% and 6.25% respectively. The overall listing is conducive to improving the profitability of the company. On the one hand, it lies in the asset injection of excavator and tower crane with high gross profit and optimizing the product structure. On the other hand, after the consolidated statements, the related party transactions with low gross profit of external assets will further improve the overall gross profit margin through internal offset.
Looking forward to 2022, the policy underpinning effect is expected to appear, and the sales growth of construction machinery industry is expected to pick up quarter by quarter: from the investment side, the cumulative growth rate of fixed asset investment in 2021 showed a trend of high before low, infrastructure investment decreased from 35% in February to 0.21% in December, and real estate investment decreased from 38% in February to 4.4% in November. From the product sales data, according to the Construction Machinery Industry Association, the sales volume of industrial cranes (including automobile, truck and crawler) was 79000 in 2021, with a year-on-year increase of 1%. Quarterly, the sales growth rate of Q1-Q4 was 85%, 8%, – 34% and – 43% respectively, showing a trend of “high in the front and low in the back”. We believe that under the background of the central economic conference’s main tone of “stability first”, infrastructure construction is carried out moderately in advance, and the downstream investment side is expected to improve marginally. Under the influence of policy catalysis and the base of “high before low in 2021”, the sales growth rate in 2022 is expected to pick up quarter by quarter.
Investment suggestion: according to the estimation of the internal assets of the current listed companies, we estimate that the company’s revenue from 2021 to 2023 will be 89.34 billion yuan, 95.76 billion yuan and 102.36 billion yuan respectively, with a year-on-year growth rate of 20.8%, 7.2% and 6.9% respectively, and the net profit will be 5.62 billion yuan, 6.41 billion yuan and 7.37 billion yuan respectively, with a year-on-year growth rate of 50.8%, 14.1% and 14.9% respectively; The investment rating of overweight-a is given for the first time. The six-month target price is 6.55 yuan, which is equivalent to 8 times the dynamic P / E ratio in 2022.
Risk warning: infrastructure real estate investment is lower than expected; Increased competition and the risk of gross profit margin decline; The overall listing progress is less than expected; Overseas market expansion is blocked.
