Under the decline in revenue and the obstruction of electrification transformation, Sany Heavy Industry plans to use 30 billion to purchase financial management

Overseas markets have become the main source of revenue, can the transition to electrification save the decline of the domestic market?

"China Science and Technology Investment", Long Min, Li Wanting

Recently, Sany Heavy Industry (600031. SH) announced its 2023 financial results and first quarter 2024 financial results. According to the financial report, in 2023, Sany Heavy Industry will achieve operating income of 74.019 billion yuan, a year-on-year decrease of 8.44%; The net profit attributable to the parent company was 4.527 billion yuan, an increase of 5.53% year-on-year. Judging from the first quarter report of 2024, Sany Heavy Industry achieved operating income of 17.662 billion yuan, a year-on-year decrease of 0.73%; net profit was 1.58 billion yuan, a year-on-year increase of 4.21%.

In contrast, the main competitor in the industry, Liugong (000528. SZ), Zoomlion (000157. SZ) achieved revenue and net profit growth in both 2023 and the first quarter of 2024.

It is worth noting that with the decline in the performance of Sany Heavy Industry in the past two years, its market value has also been shrinking. From 2021 to 2023, Sany Heavy Industry's revenue will drop by more than 30%, and its market value will also fall from a high of more than 400 billion yuan in 2021 to less than 150 billion yuan today, and its market value will shrink by more than 250 billion yuan.

Revenue declined, but still invested 30 billion wealth management

Founded in 1994, Sany Heavy Industry Co., Ltd. is mainly engaged in the manufacture and sales of concrete machinery, road machinery, crawler lifting machinery, piling machinery, excavation machinery and truck lifting machinery. Among them, excavation machinery is the largest business of Sany Heavy Industry.

With the cooling of infrastructure investment, in 2023, the downward trend of excavator sales in mainland China has not been significantly improved. According to the statistics disclosed by the China Construction Machinery Industry Association, from January to December 2023, the main manufacturers of excavators in mainland China sold a total of 195,000 excavators, a year-on-year decrease of 25.4%, which is the second consecutive year that the sales of excavators in mainland China have fallen by more than two percent.

The performance of Sany Heavy Industry has also been greatly affected. According to the financial report data, in 2023, Sany Heavy Industry's excavation machinery revenue will be 27.636 billion yuan, a year-on-year decrease of 22.71%. In addition, although Sany Heavy Industry's net profit increased slightly by 5.53% to 4.527 billion, this figure is less than 30% of 2020.

In fact, the challenges faced by Sany are much more than that. The annual report shows that from 2021 to 2023, the inventory turnover rate of Sany Heavy Industry will be 4.18 times, 3.18 times, and 2.68 times, respectively, a year-on-year increase of 2.40%, -23.92%, and -15.72%, respectively, and the turnover capacity will gradually decline, which also means that Sany Heavy Industry is facing a certain inventory backlog risk.

On the other hand, from 2021 to 2023, the turnover rate of accounts receivable of Sany Heavy Industry will be 5.16 times, 3.58 times, and 2.98 times respectively, and the average payment collection time will increase from 69 days to 120 days. It is worth noting that in 2023, Sany Heavy Industry will incur a total credit impairment loss of 117 million yuan due to the increase in the bad debt loss of accounts receivable. Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said: "The extension of the payment collection time may increase the financial pressure, especially during the period of increasing uncertainty in the economic environment. The company should strengthen the management and collection of accounts receivable, and at the same time, it should also strengthen the prevention and assessment of bad debt risks, and take countermeasures in advance. ”

Even so, Sany still chooses to invest a large amount of money in the wealth management product market. On April 28, Sany Heavy Industry announced that the company intends to use its own idle funds of no more than 30 billion yuan to purchase low-risk wealth management products, and the total quota at any point in time does not exceed 30 billion yuan, within which the funds can be used on a rolling basis.

Judging from the information in the past announcements, since 2015, Sany Heavy Industry has taken out 3 billion yuan of idle own funds to purchase bank wealth management products, and since then, the amount of idle own funds used by Sany Heavy Industry has increased year by year, and from 2020 to the present, Sany Heavy Industry plans to come up with 30 billion yuan of idle own funds every year.

Although Sany Heavy Industry has publicly stated many times that the basic financial products purchased are principal-guaranteed or low-risk, with good liquidity and relatively good investment returns. The counterparties are banks, trusts, brokers, funds, insurance and other financial institutions, and there is no related relationship, but 30 billion yuan still accounts for 44.09% of Sany Heavy Industry's net assets last year.

Bai Wenxi said: "Sany Heavy Industry can increase the company's cash flow by using its own idle funds to purchase low-risk wealth management products, but there are also certain potential risks. First of all, large-scale capital investment may affect the company's main business and disperse the company's resources; Second, while investment products are described as principal-protected or low-risk, there is always uncertainty in the financial markets, and there are risks associated with any investment. If the income of wealth management products fails to meet expectations, it may have an impact on the company's profits; Finally, the large-scale use of own funds for investment may affect the financial soundness of the company and reduce the company's ability to respond to risks. Therefore, when making this decision, Sany should fully consider these potential risks and make a prudent decision. ”

The transition to electrification faces many challenges

From an objective point of view, although Sany Heavy Industry's revenue performance has fluctuated, its performance in the international market is still remarkable. According to the financial report data, in 2023, Sany Heavy Industry will achieve international revenue of 43.258 billion yuan, an increase of 18.28% year-on-year, and international revenue will account for 58.44% of the main business income, breaking through the 50% mark for the first time, an increase of about 13 percentage points compared with 2022.

Sany Heavy Industry also said that the domestic construction machinery market is still in the bottoming period; Driven by favorable factors such as the growth of overseas infrastructure and mining investment, the export business of construction machinery maintained growth.

Judging from past data, from 2021 to 2023, Sany Heavy Industry's international revenue will be 24.846 billion yuan, 36.571 billion yuan, and 43.258 billion yuan respectively, showing a year-on-year growth trend. However, it cannot be ignored that the growth rate of Sany Heavy Industry's international sales revenue from 2021 to 2023 will be 76%, 47%, and 18% respectively, and the growth rate will slow down significantly. In contrast, XCMG (00425. SZ), Zoomlion and Liugong all exceeded 10 billion yuan in overseas revenue, with growth rates of 33.70%, 79.20% and 41.18% respectively, all of which were significantly ahead of Sany Heavy Industry.

Not only that, although the current overseas market is still a blue ocean, but in the process of globalization, Sany still needs to face many risks. For example, Sany Heavy Industry said in its financial report that the actual investment income last year was -177 million yuan, a year-on-year decrease of 123.74%, mainly because of the impact of forward foreign exchange contract losses.

In addition, under the dual role of the "double carbon" policy and the rapid development of the new energy industry, the electrification of construction machinery is accelerating, and this track is ushering in a new round of competition. According to data from the China Construction Machinery Industry Association, in the context of policy promotion and environmental pressure, it is expected that the electrification penetration rate of construction machinery in mainland China will exceed 30% in 2025.

At the 2024 Paris International Construction Machinery Exhibition, which just ended on April 27, Zeng Guangan, chairman of Liugong, said at the scene that Liugong will be committed to providing comprehensive electric construction machinery solutions, and plans to launch more than 40 pure electric equipment by 2027, including electric excavators, loaders, aerial platform equipment, stackers, skid steer loaders, graders, etc.

Zoomlion's 2023 annual report also shows that in 2023, Zoomlion will develop and market a total of 49 new energy products. Up to now, there are 177 new energy product models on sale, among which the main engine products such as electric straight arm series aerial work platform products and new energy mixer trucks have been sold in batches, and new energy forms include pure electric, hybrid, hydrogen fuel, etc.

At the same time, a number of emerging enterprises represented by Brayton Technology Co., Ltd. have also entered the subdivisions such as electric loaders in a timely manner, and have become leading enterprises in some fields. The double squeeze of traditional construction machinery manufacturers and new energy construction machinery manufacturers will have a greater impact on the electrification transformation of Sany Heavy Industry to a certain extent.

However, under the increasing pressure of transformation, Sany Heavy Industry's R&D investment will decline instead of increasing in 2023. According to the financial report of Sany Heavy Industry, in 2023, Sany Heavy Industry's R&D expenses will be 5.865 billion yuan, a year-on-year decrease of 15.28%. On the other hand, Liugong and Zoomlion will invest 21.37% and 27.14% year-on-year in 2023, respectively.

The reporter sent a letter to Sany Heavy Industry on the decline in revenue, capital management, and electrification transformation, but has not received a reply so far.