20230109-招银国际-三一国际-00631.HK-Expansion_to_new_energy_equipment_sector_with_an_ambitious_target_6页_1011kb

SANY International (631 HK) Summary

Core Content

SANY International (631 HK) is expanding into the new energy equipment sector, particularly focusing on lithium battery equipment manufacturing. This move is expected to serve as a significant growth driver for the company. The company has acquired a 95% interest in SANY Tech, a firm specializing in R&D, manufacturing, and sales of new energy battery equipment. SANY Tech has already completed a 3GWh lithium battery production line, which is estimated to generate RMB300mn in revenue for 2023E.

Main Points

• Strategic Expansion: SANYI aims to enter the lithium battery equipment market, leveraging its existing relationships with battery manufacturers and in-house component production capabilities.
• Revenue Target: SANYI has set an ambitious revenue target of RMB3bn for 2025E, which is expected to be driven by new energy equipment.
• Technology and Production: SANY Tech has developed all 34 types of equipment for the production line in-house and plans to increase its annual output to 5GWh. The company has 300 R&D personnel, with an expected increase of 30% in 2023E.
• Market Position: The company's existing business relationships with battery manufacturers are seen as a competitive advantage in promoting its new battery equipment.
• Financial Performance:
  • Revenue has been growing consistently, with a 50% YoY increase in 2022E.
  • Adjusted net profit is projected to increase from RMB1,045.1mn in FY20A to RMB2,327mn in 2024E.
  • Earnings per share (EPS) are expected to rise from RMB0.34 in FY20A to RMB0.74 in 2024E.
  • The company's P/E ratio is projected to decrease from 17.7x in FY21A to 9.7x in 2024E, indicating potential undervaluation.
• Valuation and Target Price: The current price is HK$8.20, with a target price of HK$13.20, representing a potential upside of 61.0%. The P/B ratio is expected to decrease from 2.6x in FY21A to 1.7x in 2024E.
• Growth Drivers:
  • The delivery of the 3GWh production line is expected to contribute ~RMB300mn in 2023E.
  • SANYI believes that even with ASPs 10–20% below industry levels, the gross margin can still be maintained at 30–40% due to production cost advantages.
• Risk Factors:
  • Weakness in mining activities.
  • Underperformance of new products.
  • Rebound in raw material costs.

Key Information

• Acquisition of SANY Tech: Acquired in late December, with a consideration of RMB0.95. SANY Tech generated RMB5.5mn in revenue from May to November 2022 and had net liabilities of RMB41.6mn as of end-Nov 2022.
• Revenue Growth: The company has shown strong revenue growth over the past few years, with a total revenue of RMB21,739mn in 2024E.
• Operating Margin: The operating margin has been relatively stable, ranging from 6.3% to 7.2% over the past few years.
• Profitability: ROE has increased from 13.6% in 2019A to 18.9% in 2024E, indicating improved efficiency and returns.
• Liquidity and Gearing: The company has a net gearing ratio of -29.3% in 2024E, indicating a strong liquidity position. The current ratio is expected to remain stable at 1.7x.
• Shareholding Structure: Sany Heavy Equipment holds 67.7% of the shares, with the free float at 32.3%.

Analyst Recommendation

• Rating: BUY (Maintain)
• Target Price: HK$13.20
• Previous Target Price: HK$13.20
• Potential Upside: 61.0%

Summary of Financial Highlights

Operating Assumptions and Growth Projections

Financial Summary

Analyst Disclosures

• The research analyst certifies that the views expressed reflect personal opinions and that no compensation is directly or indirectly related to the report.
• The analyst confirms that no trading or dealing in the stock covered in the report has occurred within 30 days prior to the report's release, nor is planned for the next 3 business days.
• The analyst does not serve as an officer of any of the Hong Kong listed companies covered in this report and has no financial interests in them.

CMBIGM Ratings

• BUY: Potential return of over 15% over the next 12 months.
• OUTPERFORM: Industry is expected to outperform the relevant broad market benchmark over the next 12 months.

Disclaimer

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• The value of investments and returns are uncertain and may fluctuate.
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Important Disclosures

• The report is not an offer or solicitation to buy or sell any securities.
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• The report is based on publicly available information and is not guaranteed in accuracy or completeness.
• The report is provided for informational purposes only and does not constitute investment advice.