20210906-招银国际-三一国际-00631.HK-Sustainable_growth_driven_by_intelligent_mining_products_and_robotic_business_6页_981kb

CMB International Securities | Equity Research | Company Update Summary

Core Content and Key Insights

SANY International (631 HK) is highlighted as a company on a path of sustainable growth driven by its intelligent mining products and robotic business. The report outlines the company's strategic shift toward automation and electrification in the coal mining equipment industry, which is identified as a structural growth driver. The robotics segment is expected to contribute significantly to earnings visibility in 2021E-2023E, with revenue projected to reach RMB1.08bn in 2021E and RMB1.3bn in 2022E, surpassing previous forecasts.

The company has also seen a boost in external sales starting from 2H21E, which is expected to improve earnings quality. Additionally, the commencement of lighthouse factories in September and October is expected to enhance operating efficiency and reduce costs, further supporting the growth trajectory.

Main Points and Key Information

Earnings and Revenue Growth

• Revenue is projected to grow significantly from RMB5,656mn (FY19A) to RMB15,089mn (FY23E), with a CAGR of 23% in 2021E-2023E.
• Net profit is expected to increase from RMB920mn (FY19A) to RMB1,960mn (FY23E), with a CAGR of 23%.
• EPS is forecasted to rise from RMB0.30 (FY19A) to RMB0.63 (FY23E), with a CAGR of 20.8%.

Valuation and Target Price

• Target Price (TP) is revised to HK$14.3, up from HK$11.9, based on a 23x P/E multiple.
• EV/EBITDA is expected to decline from 19.7 (FY19A) to 9.8 (FY23E), indicating improving valuation efficiency.
• P/E and P/B ratios are projected to decrease over time, suggesting a potential undervaluation in the long term.

Financial Performance Highlights

• 1H21 Revenue increased by 31% to RMB5,442mn, with mining equipment and logistics equipment contributing 36.2% and 21.6% YoY growth, respectively.
• Gross margin declined slightly in 1H21 to 25.8%, mainly due to raw material cost pressures and product mix changes.
• R&D spending rose by 77% YoY to RMB340mn, highlighting the company's commitment to innovation.
• Administrative expenses increased only 7% YoY, indicating good expense control.
• EBITDA is forecasted to grow from RMB1,346mn (FY19A) to RMB2,711mn (FY23E), with EBITDA margin decreasing slightly from 24% to 18%.

Strategic Initiatives

• The robotics segment reached RMB400mn in 1H21, accounting for 8% of total revenue, and is expected to grow to RMB0.8-1.0bn in 2021E.
• The backlog for robotic business reached RMB1.3bn in August 2021, indicating strong demand.
• The lighthouse factories are expected to improve production efficiency and cost control, which will be beneficial in 2022E.
• The product mix is expected to shift, with intelligent mining equipment and robotics gaining traction.

Risk Factors

• Weakening mining activities could impact revenue growth.
• Higher-than-expected expenses to develop new products may affect profitability.

Shareholder Structure and Performance

• Sany Heavy Equipment holds 67.7% of shares, indicating strong internal ownership.
• Free float is 32.3%, suggesting moderate market liquidity.
• Share performance has been positive over the past 12 months, with a price increase of 14.7% and dividend yield of 2.2% in 2021E.

CMBIS Ratings

• The report reiterates a BUY recommendation, with a target price of HK$14.3.
• The potential return is estimated at over 15% over the next 12 months.

Financial Summary

Income Statement

• Revenue is expected to grow consistently, with 38.1% YoY growth in FY21E.
• Net profit is forecasted to increase by 26.8% in 1H21, with after tax profit reaching RMB829mn.
• EBIT is expected to rise from RMB1,097mn (FY19A) to RMB2,362mn (FY23E), indicating improved operating performance.

Cash Flow and Balance Sheet

• Cash flow from operations is expected to increase from RMB801mn (FY19A) to RMB1,502mn (FY23E).
• Net cash is maintained as a key component of the balance sheet, with total equity rising from RMB7,146mn (FY19A) to RMB11,158mn (FY23E).
• Current ratio is projected to improve from 1.6 (FY19A) to 1.7 (FY23E), reflecting stronger liquidity.

Key Ratios

• Gross margin is expected to improve from 25% (FY21E) to 26.3% (FY22E).
• EBITDA margin is projected to decrease slightly from 19% (FY21E) to 18% (FY22E).
• ROE is expected to rise from 14% (FY19A) to 19% (FY23E), showing improved return on equity.

Conclusion

SANY International is positioned for sustainable growth through its intelligent mining and robotics initiatives, supported by strong demand and government policies. The company's cost control measures and efficiency improvements are expected to enhance earnings quality and operating performance. With a revised target price and positive earnings forecast, the report reiterates a BUY recommendation.