\u3000\u3 Shengda Resources Co.Ltd(000603) 338 Zhejiang Dingli Machinery Co.Ltd(603338) )
Event: on March 8, the company announced that Ms. Liang Jin, the Secretary of the board of directors, plans to increase her holdings of the company’s shares in the next six months through her own or self raised funds, with an amount ranging from 8 to 10 million yuan. There is no price range for this increase. Before the implementation of the plan, Ms. Liang Jin did not hold shares in the company.
Core view: the increase of senior executives’ holdings shows confidence and is optimistic about the long-term value of the company. Industry level: from 2015 to 2021, the compound growth rate of high engine ownership and sales volume reached 53% and 59% respectively, and the industry is still in a period of rapid growth; At the company level: from 2018 to 2021, the company has continuously experienced trade friction, covid-19 epidemic, “double anti” and other stress tests. In the process of active response, the market competitiveness has been continuously enhanced. We believe that the core factor determining the company’s performance in 2022 lies not in supply (the matching degree of production capacity and demand), nor in demand (the demand outside China is very good), but in the release of profit elasticity brought by the adjustment of product structure and customer structure under the condition of stable income growth. In 2022, the company is expected to usher in the reversal of fundamental difficulties. The current valuation is at the bottom of history and has medium and long-term investment value.
The potential scale of China’s aerial work platform equipment is about 1 million units, and there is still a large market space: according to China Construction Machinery Industry Association, in terms of sales volume, the aerial work platform industry sold 160100 units (including exports) in 2021, a year-on-year increase of 54.5%, and the compound growth rate from 2015 to 2021 reached 59%; In terms of ownership, the national ownership reached 384400 units in 2021, a year-on-year increase of 43.4%, and the compound growth rate from 2015 to 2021 reached 53%; The penetration rate of China’s aerial work platform industry continues to increase, and it is still in the stage of high-speed capacity expansion, which is a typical growth track. Compared with the application of high-tech terminal market in China and the United States, China is mainly concentrated in the construction field. According to the data reported by the United lease investors in the United States, the application of construction industry in the United States accounts for only 50%. According to our calculation, the application ownership of construction industry in China and the United States is relatively close, both of which are about 350000 units, while the China State Construction Engineering Corporation Limited(601668) industry has a large scale, and the potential ownership is expected to reach 500000 units. In the future, with the expansion of application fields and the improvement of equipment penetration, assuming that with the development of non construction fields, the application proportion of construction industry will gradually drop to 50%, the potential scale of equipment ownership in China’s market is about 1 million units.
The industry has strong demand and has the ability to digest the continuously increasing production capacity, and the company’s revenue side is expected to maintain stable growth: as the largest and most mature market in the world, we take the United States as an example to verify the industry demand from two perspectives: ① manufacturing side: according to the investor relations report of Terex (Guinness parent company), in 2021, The scale of orders in hand of its high-speed machine business continued to expand. By the end of Q4 of 21, the scale of orders had reached US $1.956 billion, with a month on month increase of + 15% and a year-on-year increase of + 137%. In 2021, the revenue reached US $2.18 billion, a year-on-year increase of + 22.2%. It is estimated that the median revenue in 2022 will be US $2.35 billion, a year-on-year increase of + 7.8%. ② Leasing end: according to the report of the joint leasing investor, the world’s largest lessee, the actual total capital expenditure in 2021 exceeded US $3 billion, exceeding the budget scale of 2-2.3 billion. It is expected that 2022 will still be the capital expenditure year for equipment procurement, and the total budget expenditure is the same as that in 2021, reaching US $2.9-3.1 billion.
The worst period has passed, and the company is expected to achieve profit improvement in 2022: the company’s double anti-dumping and final adjudication has been implemented, and the repressive factors in the early stage have been alleviated to a certain extent, with a total tax rate of 43.65% (including 31.7% of anti-dumping and 11.95% of countervailing). Combined with the company’s response plan to trade frictions in 2019, it is expected that the company will still adopt the tripartite sharing mode this time, That is, the company → American lessors → end customers share the responsibility to ensure the normal sales in the American market. We believe that double reverse will affect profitability in the short term, but in the medium and long term, it has raised the threshold of market entry and optimized the pattern. The core factor determining the company’s performance in 2022 is the release of profit elasticity, which mainly depends on ① market and customer structure optimization: the company strengthens the layout of other regions except the United States, and completes product certification, channel establishment and customer development in Europe, Australia and other places. 2021 is the first year for the company’s arm products to expand in the Chinese market, with less involvement in overseas markets, 2022 is expected to be the first year for the development of arm products in overseas markets. The gross profit margin of overseas arm products is higher than that of China, bringing the repair of profitability; ② Optimization of product structure: on the one hand, the large-scale effect is expected to appear after the release of new arm capacity; on the other hand, accelerate the development of differentiated new products and bring them to the market, including glass suction cup truck, rail aerial vehicle, formwork lifting vehicle, etc., and the profit level of new products is high; ③ Strengthen internal cost control: on the one hand, strengthen the scale effect through fine management; on the other hand, improve the localization rate of parts through supply chain management. From the perspective of changes in the external environment, raw material prices and freight costs are at historic highs, and it is less likely that the cost side pressure will continue to increase significantly.
Investment suggestion: in February, the final determination of the US double tax rate was implemented, which exceeded our previous expectations. Therefore, based on conservative expectations, the company’s profit forecast for 20222023 was revised down. It is estimated that the company’s revenue from 2021 to 2023 will be 5.05 billion yuan, 6.13 billion yuan and 7.61 billion yuan respectively, with a year-on-year growth rate of 70.7%, 21.4% and 24.2% respectively, and the net profit will be 860 million yuan, 1.20 billion yuan and 1.61 billion yuan respectively, The year-on-year growth rates were 29.0%, 40.2% and 33.9% respectively, and the corresponding PE was 29, 21 and 16 times respectively; The current valuation is at the bottom of history, maintaining the Buy-A investment rating. The six-month target price is 68.73 yuan, equivalent to 22 times the dynamic P / E ratio in 2023.
Risk tip: trade friction leads to a large decline in the export market; Intensified market competition leads to pressure on product gross profit margin; The construction progress of the fixed increase project is less than expected; Undertaking double anti tariff leads to the decline of profit margin; Again sanctioned by the US market.
