20240429-招银国际-三一重工-600031.SH-2023_net_profit_a_miss__1Q24_still_weak__Stay_on_the_sidelines_7页_1mb

Sany Heavy Industry (600031 CH) reported a consolidated net profit of RMB4.53bn (+6% YoY) in 2023, missing both the company's and market's expectations. In the 1Q24, its net profit grew only 5% YoY to RMB1.58bn, supported by lower R&D and admin expenses, but hampered by sluggish overseas demand, particularly in Europe. The company anticipates moderate recovery in China's market and raised its 2025E EPS forecast by 8%, though its new estimates trail consensus by 24-29%. It suggested maintaining a HOLD rating with an updated Target Price (TP) of RMB14.80, a 7.7% upside from the current RMB16.04, based on a 24x 2024E P/E premium.

Key analyses include:

1. 4Q23 Performance: Revenue dipped YOY by 17% to RMB17.9bn, Gross Margin narrowed by ~1.9ppt to 25.6%, EBIT fell 25% YOY, and Net Profit dropped 29% YOY to RMB480mn. Several supportive factors (like a fair value gain) masked underlying pressures.
2. Overseas Revenue Slowdown (H223): While overall overseas revenue grew 4% YOY in H223 (reaching 62% of total revenue), there was deceleration in results (from 36% in H123). Growth by region (Europe +15%, Asia Pacific stable) was offset by declines in the Americas and Africa. European demand has been a major concern.
3. Sluggish 1Q24 Results: Though revenue improved slightly (+1% YoY) and gross margin expanded (+0.5ppt), net profit remained constrained. POSITIVE notes included significant operating cash flow improvement (RMB4.38bn vs RMB-1.6bn a year ago).
4. Valuation Rationale: CMBIGM revised the TP higher due to anticipation of initial stabilization in capital goods & excavator sales in China (especially 2025E) and a moderate recovery. Its 24x 2024E P/E target represents a ~0.5SD premium over its 2017-2023 average 20x P/E. Adopting an "above-average" target multiple reflects cautious optimism on future prospects.
5. Outlook & Risks: Upside risk lies in property investment stabilization in China. Downside risk increases with potential further slowdown in overseas demand.

Table: Key Metrics & Forecast Adjustments

(Note: ^ Previous Year data; **New Target Price; Changes compared to prior outlook.)

6. Disclaimers: Important disclosures cover the analyst certification, ratings scale (HOLD: +/-15% +/-10%), 30-day/non-client trading rules, CMBIGM independence, disclaimer of liability, and range of use restrictions depending on the recipient's jurisdiction (UK, US, Singapore).