\u3000\u3000 Xcmg Construction Machinery Co.Ltd(000425) (000425)
Event: on January 25, 2022, the company released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company in 2021 will be 5.5-6 billion yuan, with a year-on-year increase of 48% - 61%; The net profit after deduction from non parent company is 5-5.5 billion yuan, with a year-on-year increase of 42% - 56%, which is in line with market expectations.
Key investment points
The performance growth rate is in line with market expectations, and attention is paid to the opportunities of Q1 steady growth sector
The company fully benefited from the improvement of profitability brought by the mixed reform, and its performance grew steadily. The performance forecast of 2021 is in line with the market and our expectations. In December 2021, the central economic work conference set the tone of "steady growth". From the government work reports released by all localities and the 2022 work plan released by local development and reform commissions, it has become a key task to actively promote the commencement of project construction and ensure the "good start" of investment in the first quarter. According to incomplete statistics of China Securities Journal, from January 4 to 6, 2022, the announced total investment in major projects has exceeded 3 trillion yuan. The first half of 2022 is the stage of forming physical workload of special bond funds. Infrastructure investment in Q1 in 2021 increased by only 6% compared with Q1 in 2019. We are concerned that the growth rate of Q1 infrastructure in 2022 may exceed expectations; In addition, the real estate industry in some areas has been relaxed, paying attention to the opportunities of the construction machinery industry under the background of steady growth.
The overall listing has been steadily promoted, and the "new XCMG" is worth looking forward to
On April 6, 2021, the company announced that it plans to implement absorption and merger by issuing shares to the shareholder XCMG Co., Ltd. XCMG Co., Ltd. is mainly engaged in the group's construction machinery business, and the relevant assets are expected to be listed as a whole after the merger. According to the bond offering letter of XCMG Co., Ltd., the revenue of the main unlisted subsidiaries in 2020 is as follows: XCMG excavator (excavator, the top two sales share in China), XCMG construction machinery (tower crane, China, the top two sales share) is RMB 23.1 billion, XCMG Shi Weiying (concrete machinery, the top three sales share in China) is RMB 6.1 billion, XCMG mining machinery (mining machinery, the top five global sales share) is RMB 2.8 billion, The total income reached 38.2 billion yuan; In 2020, XCMG's main business income was 96.1 billion yuan, of which Xcmg Construction Machinery Co.Ltd(000425) income was 74 billion yuan. We expect that after the overall listing, the income scale of "new XCMG" will exceed 100 billion yuan, which is expected to jump to the first in the industry.
The leader of construction machinery with the most flexible performance continues to realize the logic of improving profitability
In the first three quarters of 2021, the gross profit margin of Xcmg Construction Machinery Co.Ltd(000425) / Sany Heavy Industry Co.Ltd(600031) / Zoomlion Heavy Industry Science And Technology Co.Ltd(000157) was 15.8% / 27.3% / 24.4% respectively, and the net profit margin of sales was 6.7% / 14.7% / 10.7% respectively. There is room for the company to double its net profit margin of sales. After the mixed reform in September 2020, the assessment mechanism of the company shifted from market share to profit. Nine external directors on the board of directors accounted for 5 seats, and the assessment of executive compensation and profit accounted for 60%. The employees of the mixed reform newly held 870 million yuan of shares (including 288 million yuan of shares held by the chairman, President and general manager), and the national manufacturing fund participated in the mixed reform with a large amount of 960 million yuan. The net profit attributable to the parent company in the first three quarters of 2021 and Q3 were + 89.4% / + 116.5% year-on-year respectively, which was significantly higher than that of the industry; The net profit rate of Q3 single quarter sales in 2021 was 5.0%, with a year-on-year increase of + 2.7pct. After the mixed reform, the company's profitability improvement logic continues to be fulfilled and the performance flexibility is released.
Profit forecast and investment rating: we maintain the forecast of the company's net profit attributable to the parent company of 5.8/79/8.9 billion yuan from 2021 to 2023, and the current market value corresponding to PE is 8 / 6 / 5 times respectively, maintaining the "buy" rating.
Risk tip: industry cycle fluctuation; Industry competition intensifies; Risk of continuous rise in raw material prices
