ZHESHANG SECURITIES·2024-07-01 08:22Investment Rating - The investment rating for the company is "Buy" (maintained) [5] Core Views - The company is one of the leading players in the engineering machinery sector in China, with significant growth potential driven by globalization and product category expansion. The effectiveness of its overseas localization strategy is notable, and both performance and valuation are expected to improve, positioning the company among international leaders [3][9]. Summary by Relevant Sections Growth Drivers - The company's overseas revenue has shown a compound annual growth rate (CAGR) of 67% from 2020 to 2023, increasing its share from 6% to 38%, with overseas gross profit margin rising from 3% to 45%. In Q1 2024, overseas revenue reached 5.7 billion yuan, a year-on-year increase of 53%, accounting for 48% of total revenue [3]. - Continuous expansion into new product categories is evident, with earthmoving and aerial machinery experiencing rapid growth. In 2023, revenue from earthmoving and aerial machinery accounted for 14% and 12% of total revenue, respectively, with year-on-year growth rates of 89.3% and 24.2% [3]. - The core business remains solid, with concrete and lifting machinery benefiting from both domestic recovery and export growth. The engineering machinery sector is expected to see a recovery driven by equipment replacement cycles, improved domestic demand, and stable exports [3]. Unexpected Logic - Market expectations suggest that domestic demand for engineering machinery remains weak, particularly in real estate. However, the company anticipates that the sector's turning point is approaching, with the domestic replacement cycle likely to commence. For instance, excavator sales in June are projected to be around 16,000 units, reflecting a year-on-year increase of approximately 1.5% [3]. Validation and Catalysts - Key indicators for validation include monthly excavator sales, domestic real estate and infrastructure investment trends, and excavator operating rates. Catalysts for growth include better-than-expected company performance, stabilization in sales of cranes and other products, and favorable policies supporting domestic infrastructure investment [4]. Research Value - The company is expected to benefit from rapid overseas expansion and the release of new products, with traditional segments like concrete and lifting machinery solidifying their market positions. The company’s valuation is currently below the industry average, indicating potential for growth [11][9]. Financial Forecast and Valuation - The company is projected to achieve net profits of 4.53 billion, 6.02 billion, and 7.69 billion yuan for 2024, 2025, and 2026, respectively, with year-on-year growth rates of 29%, 33%, and 28%. The corresponding price-to-earnings (P/E) ratios are expected to be 15, 11, and 9 [10][9].