XCMG(000425) 国投证券·2024-07-05 06:30Investment Rating and Target Price - The report maintains a Buy-A rating for XCMG with a 6-month target price of 8.4 yuan, representing a 27% upside from the current price of 6.62 yuan as of July 4, 2024 [3] - The target price is based on a 15x forward P/E multiple for 2024, reflecting the company's low valuation and growth potential [6] Core Investment Thesis - XCMG is a leading Chinese construction machinery company, ranking 4th globally and 1st in China in 2023 according to Yellow Table [1] - The company has undergone significant state-owned enterprise (SOE) reforms, including mixed-ownership reform, asset injection, and equity incentives, which have improved governance and operational efficiency [2][11] - XCMG's profitability is expected to improve with gross margin rising from 22.38% in 2023 to 23.6% in 2026, driven by cost reductions and product mix optimization [1][6] - The company is undervalued compared to peers, trading at 11.9x 2024E P/E vs industry average of 16.2x [1] Business Overview and Reforms - XCMG completed a three-step SOE reform: 1) Mixed-ownership reform in 2020, introducing strategic investors and employee持股平台 [2][14] 2) Asset injection and整体上市 in 2022, adding挖掘机,矿机,混凝土机械等优质资产 [2][15] 3) Equity incentive plan in 2023, covering 1,732 key employees [16][17] - The reforms have improved profitability, with gross margin increasing from 16.24% in 2021 to 22.38% in 2023 [1][34] - The company has optimized its product structure through asset injection, with起重机械,土方机械,工程机械备件 becoming the top 3 revenue contributors in 2022 [24][25] Growth Drivers - New product development: Strategic emerging businesses including mining machinery, aerial work platforms, and port machinery grew nearly 30% in 2023, contributing over 20% of revenue [6][49] - International expansion: Overseas revenue reached 37.22 billion yuan in 2023, up 33.7% YoY, accounting for 40.09% of total revenue [6] - The company is transitioning from "going out" to "going up" in its globalization strategy, focusing on local production, M&A, and R&D [6] Financial Performance and Valuation - Revenue is expected to grow from 92.85 billion yuan in 2023 to 121.15 billion yuan in 2026, with a CAGR of 9.3% [6][8] - Net profit is forecast to increase from 5.33 billion yuan in 2023 to 10.05 billion yuan in 2026, with a CAGR of 23.6% [6][8] - The company trades at 11.9x/9.9x/7.8x 2024E-2026E P/E, below industry average of 16.2x/12.6x/10.1x [1] - ROE is expected to improve from 9.5% in 2023 to 14.9% in 2026, driven by margin expansion and asset efficiency [8] Industry Trends - The construction machinery industry is entering a new phase with domestic demand bottoming out and exports becoming more important [6][43] - Domestic excavator sales have declined 69% from the 2020 peak, while exports have grown to account for 53.86% of total sales in 2023 [6][43] - Future growth will depend on product diversification and overseas market expansion capabilities [6][43]