Zoomlion Heavy Industry (1157 HK) - Company Update Summary
Core Content
Zoomlion Heavy Industry, listed on the Hong Kong Stock Exchange, is the subject of a company update from CMB International Securities, which reiterates a BUY rating and raises its target price (TP) from HK$10.50 to HK$16.00. The report highlights the company's strong performance and growth prospects, particularly in the construction and machinery sectors, and notes that the consensus remains conservative compared to the firm's updated forecasts.
Main Points
- Earnings Growth: CMBIS has raised its 2020E–2022E earnings forecasts by 6–7% due to increased sales volume across various segments. The net profit for 2021E and 2022E is expected to be 13% and 15% higher than the consensus.
- Target Price Increase: The TP is raised to HK$16.00 based on a 12x P/E multiple for 2021E, up from the previous 10x.
- Positive 2020E Results: Zoomlion reported a significant net profit growth of 60–72% YoY to RMB7.0–7.5bn. Revenue from concrete machinery grew by 44% YoY to RMB20bn, and from crane machinery by 58% YoY to RMB35bn.
- Strong Sales Performance: In 2020E, Zoomlion delivered 7,000 units of excavators and generated RMB2.5bn in revenue. The company targets 12,000–14,000 units in 2021E, representing substantial YoY growth.
- Strategic Growth: Zoomlion is expanding into large size excavators and sees potential for growth in the aerial working platform (AWP) segment, where it reported 100% YoY sales growth.
- Margin Outlook: The company's gross margin improved in 4Q20, and the report anticipates that this resilience will continue with the benefit of growing sales and digital transformation, which will drive higher operating margins.
Key Information
Earnings Summary (YE 31 Dec)
| Financial Year |
Revenue (RMB mn) |
YoY Growth (%) |
Net Income (RMB mn) |
EPS (RMB) |
YoY Growth (%) |
| FY18A |
28,697 |
39.3 |
2,031 |
0.27 |
51.5 |
| FY19A |
43,307 |
50.9 |
4,381 |
0.58 |
119.2 |
| FY20E |
66,646 |
53.9 |
7,297 |
0.93 |
58.9 |
| FY21E |
79,334 |
19.0 |
9,303 |
1.11 |
20.2 |
| FY22E |
88,511 |
11.6 |
10,631 |
1.25 |
12.1 |
Key Ratios (YE 31 Dec)
| Ratio |
FY18A |
FY19A |
FY20E |
FY21E |
FY22E |
| Gross Margin (%) |
27.1 |
30.0 |
28.8 |
29.2 |
29.2 |
| Net Profit Margin (%) |
6.9 |
9.9 |
10.8 |
11.6 |
11.9 |
| ROE (%) |
5.4 |
11.4 |
17.2 |
17.8 |
17.2 |
| Net Debt / Total Equity (%) |
33.6 |
31.3 |
19.2 |
3.6 |
1.6 |
Share Performance
| Metric |
Value (HK$) |
| Market Cap (mn) |
106,720 |
| Avg 3 mths t/o (mn) |
119 |
| 52w High/Low |
8.95/4.99 |
| Total Issued Shares (mn) |
1,388 (H), 6,411 (A) |
Shareholding Structure
| Shareholder |
% Ownership |
| SASAC of Hunan Province |
15.9% |
| Management team |
4.9% |
| A share free float |
61.4% |
| H share free float |
17.7% |
Risk Factors
- Unexpected weakness in infrastructure spending.
- Slow recovery of property construction.
- Risks associated with new business expansion.
Conclusion
CMBIS remains optimistic about Zoomlion's future performance, citing strong growth in key segments, improved margins, and strategic expansion into new markets. The firm believes the current valuation is attractive, and the company has the potential to deliver significant returns over the next 12 months.
