Jiangsu Hengli (601100 CH) Summary
Core Content
Jiangsu Hengli has been upgraded to BUY from Hold due to positive developments in its production and market performance. The analysis highlights the company's improving production trends and strategic moves that are expected to boost its earnings and market position.
Key Highlights
Production Growth
- Excavator Hydraulic Cylinder: Production in March showed a 12% YoY growth, driven by orders from Chinese OEMs.
- AWP Motor: March production is expected to reach 23k units, representing 90%+ YoY growth, indicating strong potential for market penetration.
- Pump & Valve: The company has a >50% market share in small excavators, with potential to increase its share in medium and large excavators.
Market Expansion
- Agricultural Machinery Components: The company is expected to benefit from the aftersales market due to shorter useful life of these components.
- Overseas Revenue: The company forecasts RMB500mn in overseas revenue for 2023E, a 100%+ YoY increase.
- Mexico Production Base: The commencement of a production base in Mexico with an estimated annual output value of RMB1.5-2.0bn will accelerate its US market penetration.
Earnings Forecast
- 2023E/24E Earnings Revised Up: The earnings forecast for 2023E and 2024E has been revised up by 1% / 10%, respectively.
- Target Price (TP): The TP has been raised to RMB90, based on a 42x 2023E P/E, which is 1SD above the 4-year average of 30x.
Key Financials
Revenue
- FY20A: RMB7,855 million
- FY21A: RMB9,309 million
- FY22E: RMB8,751 million
- FY23E: RMB9,613 million
- FY24E: RMB11,006 million
- 2023E YoY Growth: 9.8%
- 2024E YoY Growth: 14.5%
Adjusted Net Profit
- FY20A: RMB2,254 million
- FY21A: RMB2,694 million
- FY22E: RMB2,426 million
- FY23E: RMB2,869 million
- FY24E: RMB3,461 million
- 2023E YoY Growth: 15.1%
- 2024E YoY Growth: 20.6%
EPS (Reported)
- FY20A: RMB1.73
- FY21A: RMB2.06
- FY22E: RMB1.86
- FY23E: RMB2.14
- FY24E: RMB2.58
- 2023E YoY Growth: 15.1%
- 2024E YoY Growth: 20.6%
P/E and P/B
- 2023E P/E: 31.0x
- 2024E P/E: 25.7x
- 2023E P/B: 6.0x
- 2024E P/B: 5.2x
Shareholding Structure
- Wang's Family: 66.7%
- CCASS (Hong Kong): 11.5%
Stock Performance
- Current Price: RMB66.27
- 1-Month Return: 1.3%
- 3-Month Return: 1.2%
- 6-Month Return: 29.7%
- 12-Month Price Performance:
Valuation Comparison
| Ticker |
Company |
Rating |
Price (RMB) |
TP (RMB) |
Upside/Downside |
Market Cap (US$ mn) |
FY23E P/E |
FY22E P/E |
FY23E P/B |
FY22E P/B |
| 631 HK Equity |
SANY INTERNATIONAL |
BUY |
7.38 |
13.20 |
79% |
2,991 |
10.1 |
12.1 |
1.8 |
2.0 |
| 1157 HK Equity |
ZOOMLION HEAVY-H |
BUY |
4.38 |
5.24 |
20% |
7,498 |
9.2 |
11.5 |
0.6 |
0.6 |
| 2338 HK Equity |
WEICHI POWER-H |
BUY |
11.12 |
12.60 |
13% |
14,164 |
15.3 |
20.0 |
1.2 |
1.1 |
| 601100 CH Equity |
Jiangsu Hengli-A |
BUY |
66.27 |
90.00 |
36% |
13,122 |
31.0 |
35.6 |
6.0 |
7.1 |
Financial Summary
Income Statement (RMB million)
| Item |
2019A |
2020A |
2021A |
2022E |
2023E |
2024E |
| Revenue |
5,414 |
7,855 |
9,309 |
8,751 |
9,613 |
11,006 |
| Gross Profit |
2,045 |
3,464 |
4,098 |
3,620 |
4,064 |
4,717 |
| Adjusted Net Profit |
1,296 |
2,254 |
2,694 |
2,426 |
2,869 |
3,461 |
Balance Sheet (RMB million)
| Item |
2019A |
2020A |
2021A |
2022E |
2023E |
2024E |
| Total Assets |
8,427 |
10,620 |
12,332 |
15,811 |
18,120 |
20,664 |
| Total Liabilities |
2,813 |
3,269 |
3,093 |
3,094 |
3,378 |
3,458 |
| Total Shareholders Equity |
5,584 |
7,314 |
9,196 |
12,668 |
14,688 |
17,145 |
Cash Flow (RMB million)
| Item |
2019A |
2020A |
2021A |
2022E |
2023E |
2024E |
| Net Cash from Operations |
1,660 |
1,981 |
2,796 |
3,030 |
3,384 |
3,456 |
| Net Cash from Investing |
(452) |
(663) |
(932) |
(720) |
(1,020) |
(800) |
| Net Cash from Financing |
(454) |
(818) |
(714) |
1,009 |
(886) |
(1,041) |
Growth and Profitability
Revenue Growth
Adjusted Net Profit Growth
- 2023E: 15.1%
- 2024E: 20.6%
Profitability Metrics
| Metric |
2019A |
2020A |
2021A |
2022E |
2023E |
2024E |
| Gross Profit Margin |
37.8% |
44.1% |
44.0% |
41.4% |
42.3% |
42.9% |
| Operating Margin |
25.8% |
34.2% |
32.2% |
27.0% |
28.6% |
30.1% |
| EBITDA Margin |
30.6% |
38.2% |
36.5% |
32.0% |
33.8% |
35.1% |
| Adj. Net Profit Margin |
23.9% |
28.7% |
28.9% |
27.7% |
29.8% |
31.4% |
Key Assumptions and Earnings
| Item |
Old 2023E |
New 2023E |
Change |
| Hydraulic Cylinder |
5,278 |
5,282 |
0.1% |
| Hydraulic Pump and Valve |
3,165 |
3,797 |
20.0% |
| Hydraulic System |
116 |
111 |
-3.7% |
| Component |
417 |
391 |
-6.3% |
| Revenue (Hydraulic Business) |
8,975 |
9,581 |
6.8% |
| Other Business |
33 |
32 |
-4.3% |
| Total Revenue |
9,008 |
9,613 |
6.7% |
Conclusion
Jiangsu Hengli is showing positive signs of recovery and growth, with a notable increase in production and market share in key segments. The company's strategic expansion into the US and Europe, along with its strong performance in AWP motor and agricultural machinery components, supports the upgrade to BUY. The revised earnings forecast and increased target price reflect the improved outlook and accelerated growth trajectory.
