FIRST TRACTOR(601038) 渤海证券·2024-12-26 02:03Investment Rating - The report assigns an "Accumulate" rating for the company [2][7]. Core Insights - The report highlights the significant trend towards high-horsepower tractors and emphasizes the investment opportunities arising from the increase in agricultural mechanization rates. It notes that since 2004, the proportion of agricultural employment in China has been declining, reaching only 22.57% in 2022. This reduction in agricultural labor necessitates a shift towards large-scale mechanized agricultural production to ensure food security [5][6]. - The report indicates that while the mechanization rates for crops like wheat and corn are relatively high, there remains substantial room for improvement in the overall mechanization rate. As of 2023, the total number of tractors in China is approximately 21.13 million, with large and medium tractors accounting for 26.07% of this total, reflecting a clear trend towards higher horsepower tractors [5][6]. - The report also discusses the growth in the area of contracted farmland, which has increased from 6.4 million acres in 2007 to 57.6 million acres in 2022, with some provinces reaching a land transfer rate of 50%. This trend supports the development of large-scale, intensive, and modern agricultural operations, positively impacting agricultural productivity and farmer income stability [6]. - The report notes that in 2024, the government will adjust subsidies for agricultural machinery purchases and scrapping, which will lower the costs of acquiring agricultural machinery and promote mechanization levels. Additionally, the recovery of agricultural machinery exports is expected to improve domestic demand, supported by favorable domestic policies [6][19]. - The company has seen revenue recovery in the first three quarters of 2024, with net profit continuing to rise, aided by the reduction of low-efficiency assets since 2017. The company leads in market share for large and medium tractors, showcasing its competitive advantages in high-end agricultural machinery [6][7]. Summary by Sections Company Overview - The company, originally established as the First Tractor Manufacturing Plant in 1955, has evolved into a major player in China's agricultural machinery industry, with both A and H shares listed. The company has a stable shareholding structure, with the largest shareholder holding 48.81% of the shares [16][27]. Industry Background - The agricultural machinery sector is diverse, with tractors being a primary tool. The report emphasizes the ongoing need for mechanization in China's agriculture, highlighting the potential for growth in this area [39][40]. Financial Analysis - The report provides financial forecasts for the company, projecting total revenue of 11.93 billion, 12.79 billion, and 14.01 billion yuan for 2024, 2025, and 2026, respectively. Net profits are expected to be 1.02 billion, 1.15 billion, and 1.33 billion yuan for the same years, with corresponding EPS of 0.91, 1.02, and 1.18 yuan [7][8]. Profitability Forecast - The report anticipates a PE ratio of 16.74 for 2024, indicating a positive outlook for the company's profitability and growth potential [7][8].