2021-10-31Sochow Securities Co., Ltd. Zhou Ershuang, Zhu Beibei, Luo Yue conducted a study on Sany Heavy Industry and released a research report "2021 Third Quarter Report Comments: Performance is under pressure in stages, strategic investment continues to increase, optimistic about the prospects for digital and electrification development", this report gives a buy rating to Sany Heavy Industry, and the current stock price is 22.96 yuan.
Sany Heavy Industry(600031)
Event: The company released the third quarter report of 2021: In the first three quarters of 2021, the operating income was 87.718 billion yuan, +20.34% year-on-year; the net profit attributable to the mother was 12.567 billion yuan, +0.91% year-on-year, in line with market expectations. The company's performance is under pressure in stages, mainly due to seasonal market fluctuations, raw material price fluctuations and strategic investment increases.
Investment essentials
Seasonal fluctuations in the market + rising raw material prices, the performance of the third quarter is under pressure in stages
In a single quarter, the company's 2021 Q3 revenue was 20.783 billion yuan, a year-on-year -12.98%; the net profit attributable to the mother was 2.493 billion yuan, a year-on-year increase of -35.32%. The company's performance growth rate fell compared with Q2, mainly due to the fluctuation of industry demand in the third quarter, the decline in the superimposed scale effect, and the increase in raw material costs, resulting in pressure on profit margins. From July to September 2021, the domestic excavator industry sold 55,500 units, a year-on-year increase of -16%. Crane industry sales of 1971 units, year-on-year -51%. Concrete machinery, lifting machinery in the third quarter of the market volatility, mainly due to the implementation of the national six regulations switch in july this year, the industry before Q3 to clean up the national five inventory, early overdraft of part of the market demand.
In terms of single-quarter sub-business, we expect that due to the impact of environmental protection switching and real estate regulation and upgrading, the company's concrete machine plate will be relatively affected; cranes will benefit from the high prosperity of overseas wind power, and the proportion of large-tonnage crawler cranes will increase, which is relatively stable; the market share of excavators will increase, which will be relatively stable. Entering Q4 is the traditional peak season of the industry, and the impact of environmental protection switching is gradually weakening, and market demand is expected to improve month-on-month.
Raw material price fluctuations + scale effect weakened, profitability declined in the short term, and the quality of operation remained stable
In the first three quarters of 2021, the company's comprehensive gross profit margin was 27.32%, year-on-year -2.98pct; the net profit margin attributable to the mother was 14.66%, year-on-year -2.81pct, mainly affected by the increase in the cost of raw materials and other costs and the decline in scale effect. The company's expense ratio during the first three quarters was 12.76%, +1.25pct year-on-year, of which the sales/R&D expense ratio was +0.67/0.94pct, respectively. Single Q3 comprehensive gross profit margin of 24.63%, year-on-year -5.58pct; attributable net profit margin of 12.11%, year-on-year -4.15pct, mainly due to: (1) steel and other raw material prices increased; (2) downstream demand weakened quarterly, short-term scale effect decreased; (3) strategic investment strengthened, including support for dealer marketing services, digital projects, etc.
Net operating cash flow in the first three quarters of 2021 was 10.236 billion yuan, -7.61% year-on-year, of which auto finance affected nearly 2 billion yuan, and the impact was still positive after deduction. The risk of payment collection in the industry is low, the company's overdue rate is at a historic low, and the asset quality is stable.
Strategic investment continues to increase, optimistic about the development prospects of digitalization and electrification
Of the 21 lighthouse factories the company has built, 14 have been completed and put into production, and the rest are expected to be basically completed in H1 in 2022. The lighthouse factory can increase production capacity by 100%, reduce personnel by 75%, and reduce labor + material costs by 10%. With the lighthouse factory put into operation, downstream demand picks up, and raw material prices return to normal, the company's profitability is expected to rebound.
The company's strong R&D investment layout "two new and three modernization" field, 2021 Q3 company's single quarter R & D expense ratio of 6.48%, a record high. The electrification business began to enter the cashing period, and the sales of Q3 electric construction vehicles (mixer trucks + dump trucks) grew rapidly, and the annual sales volume is expected to exceed 1,000 units. The value of electrified engineering vehicles is more than 2 times that of traditional engineering vehicles, and the gross profit margin is significantly higher. With the implementation of the "double carbon" related policies, we expect that the company's electrified products will continue to increase in the next few years, becoming a major growth point in performance.
Outlook 2022: The crane and excavator sectors are developing steadily, and electric mixer trucks contribute to new growth points
In 2021, there are still 1.4 trillion yuan of new special debt quotas, which are expected to be issued before the end of the year, driving the concentration of large-scale infrastructure projects. Looking forward to 2022, the company's three major business sectors: (1) concrete machinery: affected by the decline in real estate construction area/investment amount, the domestic demand side of concrete machines is under pressure, and the electrified mixer truck has entered the performance cash period, which is expected to disperse the revenue pressure; (2) cranes: the global wind power market is booming, the demand for large-tonnage crawler cranes is strong, and the income is expected to grow steadily; (3) excavators: The overseas demand for excavators is strong, and the blood transfusion for the company continues, and the factory in Indonesia is completed in 2022, and overseas revenue is expected to further increase Under the trend of domestic small diggers, the impact of real estate/infrastructure fluctuations on excavator demand weakened, and we expect the company's excavator sector business to maintain stable and positive growth.
Earnings Forecast and Investment Rating: Taking into account fluctuations in industry demand and rising raw material costs, we have adjusted the company's 2021-2023 from 177/205/22 billion yuan to 170/205/22 billion yuan, and the current market value corresponds to PE of 11/9/9 times, maintaining a "buy" rating.
Risk Warning: Industry cycle volatility; intensified competition in the industry; international trade disputes; digital transformation is less than expected
A total of 23 institutions have given ratings in the last 90 days, 20 buy ratings and 3 overweight ratings; the average target price of institutions in the past 90 days has been 36.33; the Securities Star Valuation Analysis Tool shows that Sany Heavy Industry (600031) good company rating is 3.5 stars, good price rating is 3.5 stars, and valuation comprehensive rating is 3.5 stars.