\u3000\u30 Shenzhen Guohua Network Security Technology Co.Ltd(000004) 25 Xcmg Construction Machinery Co.Ltd(000425) )
Event overview:
(1) on May 17, the company issued the report on absorption and merger of XCMG Construction Machinery Co., Ltd. and related party transactions (Revised Draft). At present, the overall listing process of the company is in the second feedback stage of the review of administrative licensing projects by the CSRC. The company has completed the second feedback reply.
(2) on April 30, the company released the first quarterly report of 2022, realizing a revenue of 20.033 billion yuan, a year-on-year decrease of – 19.79%; The net profit attributable to the parent company was 1.405 billion yuan, a year-on-year decrease of 18.6%.
Core view: the performance in the first quarter of 2022 exceeded expectations. Under the influence of factors such as the periodic decline of the industry, the rise of raw material prices and the epidemic, the short-term performance is under pressure, but the performance ranks in the forefront of the industry. ① Revenue side: the comprehensive competitiveness of the company is enhanced, and the market share of various products is increased; ② Profit side: the asset quality of the company is improved, the cost and expense are well controlled, and the profit is improved to release the performance elasticity. From the perspective of the whole year of 2022, the industry level: under the catalysis of the steady growth policy, there are plenty of projects to be started in the downstream, and the growth rate of industry sales is expected to be “low before high”. If the epidemic situation is effectively controlled, the demand squeezed in the early stage will be released in the second quarter; Company level: the overall listing has been steadily promoted. After the high-quality construction machinery assets at the group level are injected into the main body of the listing, the product structure and governance structure will be optimized, and the profitability is expected to be further improved. As the head complete machine factory in the construction machinery industry, the valuation level is relatively low. We believe that the company’s comprehensive competitiveness continues to improve and has medium and long-term configuration value.
Financial review of Q1 in 2021 / 2022: revenue performance significantly surpassed the industry, and improved profitability released performance flexibility. In 2021, the performance flexibility was released, with a revenue of 84.328 billion yuan, a year-on-year increase of 14.01%, and a net profit attributable to the parent company of 5.615 billion yuan, a year-on-year increase of 50.57%, all reaching a record high. The profit growth rate is higher than the income growth rate. On the one hand, the expenses are strictly controlled. On the other hand, under the principle of prudent accrual, the historical burden is cleared and the loss of credit impairment is greatly reduced. The short-term pressure on Q1 performance in 2022 is mainly due to the overall pressure of the industry: ① the epidemic affected the downstream construction, resulting in the postponement of the peak demand season; ② High base in the same period in 2021. According to the data of China Industrial Association, the growth rate of high-altitude engineering products was 50% in 20212022, and the performance of high-altitude engineering products was significantly higher than that of the emerging industry. According to the data of 20212022; ② The overseas market continues to expand, and the export growth rate is higher than that of China; ③ The company’s comprehensive competitiveness has been enhanced. In 2021, 12 types of hosts ranked first in China’s industry, and the share of 22 types of products increased year-on-year.
The overall listing has been steadily promoted, and the comprehensive competitiveness is expected to rise to a higher level in the future: at present, the company plans to issue shares to absorb and merge XCMG Co., Ltd. to realize the overall listing is in the second feedback stage of the review of the CSRC. XCMG’s Unlisted assets mainly include: ① high-quality construction machinery assets: excavator (the second in China and the sixth in the world), mining machinery (the top five in the world for open-pit excavation and transportation equipment), concrete machinery (the first camp in the world) and tower crane (the second in China); ② Emerging business: port machinery has made a rapid breakthrough and its revenue has tripled; Agricultural machinery and unmanned rescue platform are in the stage of R & D and trial production, and strive to become a new growth pole; ③ Parts matching: hydraulic, transmission and other parts enterprises will play an active role in independent and controllable technology, ensuring supply and reducing cost. According to the reference data of the report on absorption and merger and related party transactions, after the overall listing of XCMG’s construction machinery assets, the income of the listed entity and the net profit attributable to the parent company in 2021 are estimated to be 116.77 billion yuan and 8.21 billion yuan respectively, an increase of 38.47% and 46.19% respectively compared with that before the transaction. At the same time of the expansion of the scale, the profitability is expected to continue to improve in the future:
(1) the gross profit margin is expected to increase: ① the product structure is continuously optimized. Comparing XCMG with the current listed entity Xcmg Construction Machinery Co.Ltd(000425) , from 2019 to 2021, XCMG’s gross profit margin was higher than Xcmg Construction Machinery Co.Ltd(000425) 522, 5.65 and 5.22pct respectively, mainly due to the relatively high gross profit margin of excavator, tower crane and concrete machinery business in unlisted assets, which were about 30%, 20% and 17.5% respectively, higher than Xcmg Construction Machinery Co.Ltd(000425) comprehensive gross profit margin. ② Overall listing is conducive to large-scale production and cost reduction. With the expansion of production scale, the company will achieve effective cost control through centralized procurement, sorting out supplier relations, overall design and improving material utilization.
(2) optimize the ownership structure and governance structure, and improve the ability of cost control: ① decision-making efficiency: the company’s management level and organizational structure are further simplified, and the governance mechanism is more flat, so as to improve the decision-making efficiency of listed companies; ② Operational efficiency: promote business development, transformation and upgrading, further promote business collaboration and improve operational efficiency with the financial support of the capital market; ③ Management efficiency: the transformation of digital intelligent management will also enable the company to reduce capital costs and operating costs in operation and management, and improve the efficiency of project management and resource management.
(3) improve the incentive mechanism and long-term core competitiveness: after the overall listing, in order to maintain the stability of the core team, the company will further improve the market-oriented employment and salary incentive mechanism, further stimulate the motivation and entrepreneurial enthusiasm of the core employees, stimulate the operation vitality and endogenous motivation of the company, enhance the core competitiveness of the listed company and ensure the long-term and stable development of the enterprise.
Investment suggestion: the overall listing has not been completed. According to the internal business of the current listed company, we estimate that the company’s revenue scale from 2022 to 2024 will be 87.97 billion yuan, 92.84 billion yuan and 98.82 billion yuan respectively, with a year-on-year growth rate of 4.3%, 5.5% and 6.4% respectively, and the net profit will be 6.16, 7.04 and 7.72 billion yuan respectively, with a year-on-year growth rate of 9.8%, 14.3% and 9.6% respectively, and the corresponding PE will be 6.6, 5.8 and 5.3 times respectively; Maintain the investment rating of “overweight-a”, and the six-month target price is 5.9 yuan, which is equivalent to 7.5 times the dynamic P / E ratio in 2022.
Risk warning: infrastructure real estate investment is lower than expected; The effect of steady growth policy is less 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.
