20231031-招银国际-3Q23_earnings_review__Weichai___Zoomlion_beat__SANY_Heavy___Jiangsu_Hengli_miss_8页_691kb

Summary of CMB International Securities Equity Research: Q3 2023 Earnings Review

CMB International Securities provides an earnings review for four companies in the capital goods sector based on their third-quarter 2023 (Q323) results. Key highlights include performance outcomes, drivers of financial metrics, and forward-looking estimates. Below is a summary of the main findings:

Key Findings Overview

• Four companies analyzed: Weichai Power, Zoomlion, Jiangsu Hengli, and SANY Heavy.
• Two companies (Weichai Power and Zoomlion) exceeded earnings expectations.
• Two companies (Jiangsu Hengli and SANY Heavy) underperformed relative to expectations.
• Gross margin expansion was a common theme, but revenue growth varied due to product mix, geographic focus, and FX volatility.

Company-Specific Analysis

Weichai Power (238 HK / 000338 CH)

• Performance: Results exceeded expectations; Q323 net profit surged 181% YoY to RMB2.6bn (near high end of pre-announced range), beat by a significant margin.
• Revenue Growth: 24% YoY to RMB54.2bn, driven by KION's business (12% YoY FX-adjusted) and engine/Heavy Duty Truck (HDT) business (33% YoY).
• Margin and Expenses: Gross margin expanded 6.5ppt YoY and 1.6ppt QoQ to 21.8%; operating expenses under control. 9M23 net profit grew 96% YoY to RMB6.5bn, accounting for 77% of full-year estimate.
• Ratings: BUY; potential return >15% over 12M.

Zoomlion (1157 HK / 000157 CH)

• Performance: Beat expectations; Q323 net profit surged 80% YoY to RMB815mn, supported by overseas growth and low-base effect.
• Revenue Growth: 22% YoY to RMB11.4bn; China revenue flat (0.7% YoY), overseas revenue surged 78% YoY.
• Margin and Expenses: Gross margin expanded 6.1ppt YoY (-1.5ppt QoQ) to 27.5%, helped by operating leverage and cost reductions. R&D spending increased 47% YoY. 9M23 net profit grew 32% YoY to RMB2.86bn, at 77% of full-year forecast.
• Ratings: BUY; potential return >15% over 12M.

Jiangsu Hengli (601100 CH)

• Performance: Slight miss; Q323 net profit dropped 31% YoY to RMB475mn (excluding FX gains), revenue slightly down 7% YoY to RMB1.9bn.
• Margin and Expenses: Gross margin expanded 6.2ppt QoQ but remained at 43%, attributed to reduced customer discounts. Net finance income dropped sharply (88% YoY).
• Ratings: BUY; potential return outlook neutral, with downside risk to full-year forecasts.

SANY Heavy (600031 CH)

• Performance: Mixed results with a miss; Q323 net profit dropped 33% YoY to RMB647mn, revenue fell 15% YoY.
• Margin and Expenses: Gross margin expanded 5.6ppt YoY and 0.5ppt QoQ to 29.4%, supported by cost controls. However, FX losses impacted net finance income. 9M23 net profit grew 13% YoY, covering 76% of full-year estimate.
• Ratings: HOLD; cautious stance due to expected weakness in excavator exports.

Key Insights

• Gross margin expansion was a primary driver for most companies, contrasting with revenue growth variability.
• FX volatility negatively affected net finance income for several firms.
• Recommendations emphasize BUY for Weichai Power and Zoomlion due to strong performance in gas HDT and overseas growth, while HOLD is maintained for SANY Heavy amid export risks.

Important Disclosures

This report contains forward-looking statements subject to risks; actual outcomes may differ. Past performance does not guarantee future results. For details, refer to the full report and relevant disclosures.