20211004-招银国际-三一国际-00631.HK-Good_crisis_management_to_remove_impact_of_power_suspension__Solid_coal_mining_equipment_order_intakes_4页

SANY International (631 HK) Summary

Core Content

SANY International (631 HK) is a company under the umbrella of China Merchants Bank, known for its production of mining equipment and port machinery. The firm recently faced an unscheduled power outage at its Liaoning production base on 23 September, which disrupted operations. However, the company quickly adapted by shifting more than half of its production process to nighttime, which is free from power outages. This adjustment, along with sourcing components from suppliers outside Liaoning, helped mitigate the impact of the crisis. Additionally, SANYI's Changsha factory, which mainly produces small-size port machinery, was not affected due to secure power supply from the local government.

Main Points

• Crisis Management: SANYI effectively managed the power outage by:

  • Shifting production to nighttime.
  • Expanding procurement from suppliers in Dalian and surrounding areas.
  • Assisting affected suppliers with independent power generation sets.

• Order Intakes:

  • Road headers: ~60 sets this year, up from ~40 sets last year.
  • ~30% of orders are for intelligent models.
  • Coal mining equipment orders cover full capacity for 1Q22E.
  • Large-size port machinery saw a 60% YoY sales growth.

• Financial Performance:

  • Revenue: Expected to grow from RMB5,656 million (FY19A) to RMB15,089 million (FY23E), with a CAGR of 23% from FY21E to FY23E.
  • Net Income: Expected to increase from RMB920 million (FY19A) to RMB1,960 million (FY23E), with a CAGR of 27.7%.
  • EPS: Projected to rise from RMB0.30 (FY19A) to RMB0.63 (FY23E), with a CAGR of 20.8%.
  • P/E Ratio: Expected to decrease from 28.1 (FY19A) to 12.3 (FY23E).
  • P/B Ratio: Projected to decrease from 3.6 (FY19A) to 2.2 (FY23E).
  • ROE: Expected to increase from 14% (FY19A) to 19% (FY23E).

• Key Ratios:

  • Gross Margin: Expected to decrease from 30% (FY19A) to 26% (FY23E).
  • EBITDA Margin: Expected to decrease from 24% (FY19A) to 18% (FY23E).
  • Net Profit Margin: Expected to decrease from 16% (FY19A) to 13% (FY23E).
  • Current Ratio: Expected to increase from 1.6 (FY19A) to 1.7 (FY23E).
  • Inventory Turnover Days: Expected to decrease from 136 (FY19A) to 102 (FY23E).

Key Information

• Target Price: HK$14.30 (maintained).

• Current Price: HK$9.22.

• Up/Downside: +55%.

• Market Cap: HK$29,033 million.

• Shareholding Structure:

  • Sany Heavy Equipment: 67.7%.
  • Free float: 32.3%.

• Stock Performance:

  • 1-month: -2.3%.
  • 3-months: +14.2%.
  • 6-months: +2.9%.

• Major Risks:

  • Weakness in mining activities.
  • Higher-than-expected expenses for new product introductions.
  • Unexpected power outages.

• Analyst Recommendation: BUY, with potential return of over 15% over the next 12 months.

Conclusion

SANY International has shown resilience in managing the recent power outage, implementing efficient strategies to maintain production and secure supply chains. The company has experienced strong order intakes, particularly in the coal mining equipment segment, and is projected to see continued revenue and earnings growth. Despite a decline in profit margins, its financial position remains robust, with a growing market cap and increasing return on equity. The firm is currently rated as a BUY, reflecting its potential for strong performance in the coming year.