20221031-招银国际-三一重工-600031.SH-Another_weak_quarter__Still_challenging_6页_971kb

报告摘要

SANY Heavy Industry (600031 CH) Company Update Summary

Core Content

SANY Heavy Industry reported a weak 3Q22 performance, with net profit declining by 61% YoY to RMB963mn. The earnings were primarily driven by finance income and other gains, highlighting the company's reliance on non-core revenue sources. The company also experienced a 8% YoY drop in revenue to RMB19bn, with a 1.1ppt YoY decline in gross margin to 23.8%. Despite a slight 0.6ppt QoQ improvement, the overall margin contraction was due to increased selling, distribution, and R&D expenses. EBIT dropped 91% YoY to RMB158mn, indicating significant pressure on operational profitability.

Key Financial Highlights

Revenue (3Q22): RMB19bn (down 8% YoY)
Gross margin (3Q22): 23.8% (down 1.1ppt YoY, up 0.6ppt QoY)
Selling & distribution expense ratio (3Q22): 8.4% (up 2.9ppt YoY)
R&D expense ratio (3Q22): 8.4% (up 2ppt YoY)
EBIT (3Q22): RMB158mn (down 91% YoY)
Net profit (3Q22): RMB963mn (down 61% YoY)
Operating cash inflow (3Q22): RMB500mn (up 12% YoY)

For the first nine months of 2022:

Revenue: RMB3.6bn (down 33% YoY)
Net profit: RMB3.6bn (down 71% YoY)

Overseas Performance

Overseas revenue represented 46% of total revenue in 3Q22, with a 68% YoY increase to approximately RMB9.3bn. Excavators accounted for 49% of overseas revenue, showing a 89% YoY surge. For 9M22, overseas revenue grew 44% YoY to RMB25.9bn, with excavators contributing 47% of total overseas revenue and a 63% YoY increase.

Earnings Forecast and Target Price

The research firm has revised its 2022E/23E/24E earnings forecast downward by 52% / 38% / 36%, which is 37%-44% below consensus. The target price has been cut to RMB14.7, based on a 28x 2022E P/E (average since the upcycle started in 2017 + 1SD). The firm maintains a HOLD rating due to the lack of upside potential, but acknowledges the potential for earnings recovery in 2023E driven by a low earnings base and overseas growth.

Valuation Metrics

EV/EBITDA (2022E): 25.7x
P/E (2022E): 27.4x
P/B (2022E): 1.9x
Yield (2022E): 1.2%
ROE (2022E): 6.9%
Net gearing (2022E): Net cash

Share Performance

1-month return: 3.1% (Absolute), 10.5% (Relative)
3-month return: -16.9% (Absolute), -3.3% (Relative)
6-month return: -5.1% (Absolute), 1.8% (Relative)

Shareholding Structure

SANY Group: 29.2%
Hong Kong CCASS: 7.9%
Liang Wengen: 2.8%
Others: 60.8%

Risk Factors

Upside risk: Stabilization of property investment
Downside risk: Further weakness in construction activities; slowdown of overseas demand

Market Outlook and Industry Ratings

CMBIGM Ratings: HOLD for SANY Heavy Industry
Industry Ratings: OUTPERFORM, MARKET-PERFORM, UNDERPERFORM

Financial Summary

Income Statement (YE 31 Dec)

Item	FY20A	FY21A	FY22E	FY23E	FY24E
Total revenue	100,054	106,874	76,567	81,793	86,289
Cost of sales	-70,034	-78,978	-58,758	-62,518	-65,653
Gross profit	30,021	27,896	17,808	19,275	20,636
Net profit	15,431	12,034	4,441	5,859	6,426

Cash Flow Summary (YE 31 Dec)

Item	FY20A	FY21A	FY22E	FY23E	FY24E
Cash flow from operation	13,363	11,904	4,534	8,559	7,999
Net capex on PP&E	-4,133	-9,977	-4,500	-3,500	-3,000
Cash flow from investing	-11,250	-9,288	-3,118	-3,147	-2,272
Cash flow from financing	-2,452	-1,315	-4,170	-1,780	-2,441
Change in cash	-339	1,301	-2,754	3,632	3,287

Balance Sheet (YE 31 Dec)

Item	FY20A	FY21A	FY22E	FY23E	FY24E
Non-current assets	34,827	44,838	42,302	48,999	45,029
Current assets	91,428	93,719	84,594	98,311	93,928
Current liabilities	62,049	61,432	48,543	63,876	50,813
Non-current liabilities	6,018	12,029	12,529	13,029	13,029
Equity	58,188	65,095	65,824	70,406	75,115

Key Ratios

Ratio	FY20A	FY21A	FY22E	FY23E	FY24E
Gross margin	30.0%	26.1%	23.3%	23.6%	23.9%
EBIT margin	16.8%	10.1%	2.8%	5.9%	6.3%
Net profit margin	15.9%	11.5%	5.9%	7.3%	7.6%
ROE	29.8%	20.0%	6.9%	8.8%	9.0%
Current ratio	1.5x	1.5x	1.7x	1.5x	1.8x
Receivable turnover days	91	93	116	114	111
Inventory turnover days	87	87	103	102	101
BVPS	6.67	7.50	7.57	8.10	8.63

Conclusion

SANY Heavy Industry continues to face challenges in its domestic market, with declining revenue and net profit. However, the company's overseas business has shown resilience, contributing significantly to revenue growth. Despite the improved performance in overseas markets, the firm has lowered its earnings forecasts and target price due to lower sales volume and higher expenses. The HOLD rating reflects the limited upside potential, although the firm remains optimistic about potential recovery in 2023E. The bear case scenario suggests a 1.5x P/B valuation, which could serve as a key support level in the event of a prolonged downturn.

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