2021-11-01Sochow Securities Co., Ltd. Zhou Ershuang, Zhu Beibei, Luo Yue conducted a study on XCMG Machinery and released a research report "2021 Third Quarter Report Review: Q3 Net Profit Growth Rate +116% Year-on-Year, Profit Margin Improvement Logic Steadily Cashed In", this report gives a buy rating to XCMG Machinery, and the current stock price is 6.08 yuan.
XCMG Machinery(000425)
Event: The company released the third quarter report of 2021: the operating income in the first three quarters was 69.80 billion yuan, an increase of 36.09% year-on-year; the net profit attributable to the mother was 4.61 billion yuan, an increase of 89.35% year-on-year, which was in line with market expectations; the net profit attributable to the mother after deduction was 4.298 billion yuan, +77.80% year-on-year.
Investment essentials
Q3 net profit growth rate of +116% year-on-year, profit margin improvement logic steadily cashed in
In a single quarter, the company achieved revenue of 16.562 billion yuan in Q3 2021, +2.12% year-on-year. According to the China Construction Machinery Industry Association, the domestic excavator industry sold 55,500 units from July to September 2021, a year-on-year increase of -16%. The crane industry sold 1971 units, a year-on-year increase of -51%. The company's revenue growth rate in the third quarter was higher than that of the industry, and we judged that it was mainly due to the increase in the share of lifting machinery, aerial work platforms and other products. The company's net profit attributable to the mother in Q3 of 2021 was 806 million yuan, +116.46% year-on-year, and the profit margin improvement released the performance elastic logic continued to cash.
Cost reduction and efficiency increase release performance flexibility, credit risk controllable
In the first three quarters of 2021, the company's comprehensive gross profit margin was 15.83%, a year-on-year -2.19pct, and we judged that it was mainly due to the pressure on the cost side of raw material price increases. The company's net profit margin attributable to the mother in the first three quarters was 6.60%, +1.86pct year-on-year. In the first three quarters of 2021, the company's expense ratio was 8.45% year-on-year, -2.83pct year-on-year, of which the sales/management/R&D/finance expense ratios were 4.35%/1.16%/2.92%/0.02%, respectively, -0.65/-0.20/-0.44/-1.54pct, the cost control ability was optimized, and the profit margin improvement logic continued to be cashed. The company continues to promote cost reduction and efficiency increase from the research and development end, production end and marketing end, and there is still a lot of room for improvement in the profit margin of benchmarking international first-class enterprises.
In the first three quarters of 2021, the company's net operating cash flow was 4.253 billion yuan, a substantial increase of 507% year-on-year, and the payment collection situation was better. In the first three quarters of 2021, the company's credit impairment loss was 0.61 billion yuan, a sharp decrease from 210 million yuan in the same period of 2020, the overdue rate was at a low level, and the asset quality was higher.
It plans to invest 99 million US dollars to establish XCMG USA to consolidate the cornerstone of the globalization strategy
On October 19, 2021, the company announced that it intends to invest 99 million US dollars to establish XCMG USA and its subsidiaries in the United States to build a comprehensive base of "research, production, supply and marketing financing" and enhance the company's competitiveness in the high-end market in North America. The United States is the largest market for construction machinery sales, and the establishment of local subsidiaries is expected to alleviate the potential impact of tariff increases and "double reverses" in the North American market in the future export process, and is expected to strengthen the company's cooperation with local distributors and lessors in the United States to consolidate the cornerstone of global business development.
Mixed reform has greatly released performance flexibility, and the global leader is ready to go
In 2020, the gross profit margin of XCMG/Sany/Zoomlion was 17.07%/29.82%/28.59%, and the net profit margin was 5.06%/15.97%/11.30%, respectively, and the company's net profit margin had more than doubled. After the mixed reform in September 2020, the company gradually improved the market-oriented assessment mechanism, 9 outside directors on the board of directors accounted for 5 seats, executive compensation profit assessment accounted for 60%, mixed reform employees added 870 million yuan of new shares, since the fourth quarter of 2020, the company's single-quarter net profit has improved, net profit growth rate has led the industry, 2021 or to meet the profit inflection point, net profit continued to release performance flexibility.
Earnings Forecast and Investment Rating: Taking into account the continued high cost of raw materials, we have slightly lowered the company's net profit from 6021-80/93 billion yuan to 58/79/89 billion yuan from 60/80/93 billion yuan, and the current market capitalization corresponds to 8/6/5 times pee, respectively, maintaining a "buy" rating.
Risk warning: industry cycle fluctuations; intensified industry competition; the risk of continuous rise in raw material prices
A total of 11 institutions have given ratings and 11 buy ratings in the last 90 days; the average target price of institutions in the past 90 days has been 8.69; the Securities Star Valuation Analysis Tool shows that XCMG Machinery (000425) has a good company rating of 4 stars, a good price rating of 4 stars, and a comprehensive valuation rating of 4 stars.