Sany Heavy Industry Co.Ltd(600031) ( Sany Heavy Industry Co.Ltd(600031) ) event 1: the company released the first quarterly report of 2022. In 2022, Q1 company realized an operating revenue of 20.28 billion yuan, a year-on-year increase of – 39.5%; The net profit attributable to the parent company was 1.59 billion yuan, a year-on-year increase of – 71.3%, basically in line with market expectations.
Event 2: the company issued the draft employee stock ownership plan for 2022. The total number of shares to be granted is no more than 20.5 million, accounting for about 0.24% of the total share capital of the company. The granted shares come from the shares previously repurchased by the company.
Key investment points
Q1 is in line with expectations under the high base, and pay attention to the recovery of annual sales data
In 2022, Q1 company realized an operating revenue of 20.28 billion yuan, a year-on-year increase of – 39.5%; The net profit attributable to the parent company was 1.59 billion yuan, a year-on-year increase of – 71.3%. In the first quarter of 2022, the sales volume of excavator industry was – 39% year-on-year and that of crane industry was – 56% year-on-year. Overall, the company’s revenue performance in the first quarter of 2022 was better than that of the industry, in line with market expectations. Looking forward to the whole year, we judge that the worst quarter of the industry performance may have passed. With the rapid growth of exports and the decline of the base in the same period, the decline of Q2 is expected to narrow significantly, and the decline of Q3 industry is expected to narrow to single digits or even become positive. We pay attention to the recovery trend of industry sales in the whole year.
The steady growth policy is overweight, and the infrastructure orders have made a good start. We pay attention to the repair of Industry Valuation under the background of steady growth
On April 26, 2022, the 11th meeting of the central financial and Economic Commission stressed that we should comprehensively strengthen infrastructure construction and build a modern infrastructure system. This meeting emphasized the importance of infrastructure, which is expected to open up the immediate, medium and long-term space for infrastructure. In 2022, Q1 China Railway Group Limited(601390) accumulated the newly signed contract amount of 605.74 billion yuan, with a year-on-year increase of 84.0%. Among them, the newly signed contract amount of infrastructure construction business was 543.45 billion yuan, with a year-on-year increase of 94.1%. The newly signed orders of infrastructure projects made a good start, and the prosperity of infrastructure demand increased. We believe that there are many early pullbacks in the construction machinery sector. Under the background of steady growth, the two downstream margins of infrastructure and real estate have improved, and the valuation has room for repair.
The profit margin is expected to rise from the bottom, with excellent cash flow and stable operation
In 2022, the comprehensive gross profit margin of Q1 company was 22.2%, with a year-on-year increase of -7.7pct, mainly due to the rise in the prices of raw materials and shipping since the beginning of 2021; The net profit margin attributable to the parent company was 7.8%, with a year-on-year increase of -8.7pct; The total expense rate during the period was 16.6%, with a year-on-year increase of + 4.8pct. Looking forward to the future, the gross profit margin of the company has fallen to an all-time low in 2021 and the first quarter of 2022, and there is limited room for the subsequent decline of gross profit margin. With the decline and stabilization of raw materials and shipping prices since the beginning of 2022, the upstream of the company has strengthened cost control, the production capacity of manufacturing lighthouse factory has climbed, and the profitability assessment of marketing has been strengthened. The profit margin of the company is expected to improve month on month from Q2. In 2022, the net operating cash flow of Q1 company was RMB 1.994 billion, a year-on-year increase of + 108.45%, and the net cash ratio was 1.25. The company had excellent cash flow, stable operation and high asset quality.
It is proposed to launch an employee stock ownership plan with wide coverage to enhance the company’s long-term competitiveness
On April 29, 2022, the company issued the draft employee stock ownership plan for 2022. The total number of shares to be granted is no more than 20.5 million, accounting for about 0.24% of the total share capital of the company. The granted shares come from the shares previously repurchased by the company. The participants include 9 directors, supervisors and senior managers and no more than 6987 core employees, with a coverage rate of 29.5%. The source of shares granted this time is the company’s repurchased shares. The price of employees buying repurchased shares is 23.65 yuan / share, compared with the average price of repurchased shares of 12.70 yuan / share. This plan does not set performance assessment objectives, which covers a wide range and effectively binds the long-term interests of employees and the company.
Profit forecast and investment rating: we maintain the company’s expected net profit attributable to the parent company from 2022 to 2024 of RMB 9.695/97.12/10.557 billion, and the current market value corresponding to PE is 14.46/14.43/13.27 times respectively, maintaining the “buy” rating.
Risk tip: industry cycle fluctuation risk; International trade disputes; Electrification transformation is not as expected; Risk of continuous rise in raw material prices.
