广发机械“回归”系列八：恒立液压：下一个“恒立”或许还是恒立

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 59.75 CNY per share, based on a 30x PE multiple for 2024 [4] Core Views - The company has significantly altered the cost structure of China's excavator manufacturing industry by increasing its domestic market share in hydraulic components to 78% for cylinders, 51% for pumps, and 38% for valves, breaking foreign monopolies and supporting the global expansion of domestic excavators [2] - The company has expanded its product portfolio from cylinders to pumps, valves, and motors, and from excavators to non-excavator applications, while also pursuing globalization by following domestic companies overseas [2] - The company's net profit margin increased from 5% in 2016 to 29% in 2020, driven by price increases in hydraulic components and cost reductions due to economies of scale [2] - The company is transitioning towards becoming a precision transmission platform company, leveraging its core manufacturing technologies to expand into upstream casting, downstream applications, and linear drive systems, with the Chinese linear drive market estimated at over 80 billion CNY in 2022 [2] - The company's excavator hydraulic components are in an upward cycle, with non-excavator hydraulic components showing stable growth, and linear drive systems expected to open up future growth potential [2] Financial Forecasts - Revenue is expected to grow from 8.197 billion CNY in 2022 to 13.838 billion CNY in 2026, with a CAGR of 14.0% [3] - Net profit attributable to shareholders is projected to increase from 2.343 billion CNY in 2022 to 3.993 billion CNY in 2026, with a CAGR of 14.3% [3] - EPS is forecasted to rise from 1.79 CNY in 2022 to 2.98 CNY in 2026 [3] - ROE is expected to remain stable, ranging from 16.8% to 17.3% from 2024 to 2026 [3] Industry and Company Analysis - The company has transformed China's excavator manufacturing cost structure by increasing its market share in hydraulic components, which account for 26% of excavator production costs, and reducing reliance on foreign suppliers [21] - The company's revenue from non-excavator applications has remained stable, while excavator-related revenue has remained flat, with net profit margins showing resilience, declining only 1 percentage point from 2020 to 2023 compared to a 23 percentage point decline from 2011 to 2015 [2] - The company has expanded its product portfolio and global presence, with its stock price increasing over 30 times from 2016 to 2021, driven by improved excavator demand, increased domestic market share, and enhanced competitiveness [2] - The company's linear drive business is expected to open up new growth opportunities, with the Chinese linear drive market estimated at over 80 billion CNY in 2022, and the company has already begun small-scale supply of ball screws as of June 2024 [2] Historical Performance and Strategic Moves - The company's stock price increased over 30 times from 2016 to 2021, driven by improved excavator demand, increased domestic market share, and enhanced competitiveness [2] - The company has expanded its product portfolio from cylinders to pumps, valves, and motors, and from excavators to non-excavator applications, while also pursuing globalization by following domestic companies overseas [2] - The company's net profit margin increased from 5% in 2016 to 29% in 2020, driven by price increases in hydraulic components and cost reductions due to economies of scale [2] - The company is transitioning towards becoming a precision transmission platform company, leveraging its core manufacturing technologies to expand into upstream casting, downstream applications, and linear drive systems, with the Chinese linear drive market estimated at over 80 billion CNY in 2022 [2]