FIRST TRACTOR(SH:601038) Soochow Securities·2024-10-22 23:36Investment Rating - The report assigns a "Buy" rating for Yituo Co., Ltd. (601038) for the first time [1]. Core Views - Yituo Co., Ltd. is a leading domestic tractor manufacturer benefiting from the trends of agricultural mechanization and food security, which are driving continuous improvements in profitability [1]. - The company has significantly enhanced its profitability through cost reduction and efficiency improvements, focusing on medium and large horsepower tractors and related components [1]. - The tractor market in China is expanding due to the increasing demand for larger and higher-end agricultural machinery, with market share concentrating towards leading companies [1]. Summary by Sections Financial Forecast and Valuation - Total revenue is projected to grow from 11,534 million yuan in 2023 to 16,169 million yuan in 2026, with a CAGR of 10.89% from 2023 to 2024 [1]. - Net profit attributable to shareholders is expected to increase from 997.02 million yuan in 2023 to 1,566.24 million yuan in 2026, reflecting a CAGR of 17.22% [1]. - The latest diluted EPS is forecasted to rise from 0.89 yuan in 2023 to 1.39 yuan in 2026, with a corresponding P/E ratio decreasing from 17.81 to 11.34 [1]. Investment Highlights - Yituo Co., Ltd. has a strong market position in the tractor industry, with a market share of 22% and 19% in medium and large tractors in 2022 and 2023, respectively [1]. - The company has optimized its product structure by phasing out small tractor production and focusing on medium and large tractors, which has improved profitability [1]. - The agricultural machinery market in China has grown from 256.8 billion yuan in 2016 to 586.7 billion yuan in 2023, with a CAGR of 10.9% [1]. - The company has seen a significant increase in export revenue, with a CAGR of 35.41% from 2019 to 2023, particularly in the Russian and South American markets [1]. Growth Analysis - The company has maintained a strong focus on R&D, with investment increasing from 357 million yuan in 2019 to 461 million yuan in 2023, indicating a commitment to technological innovation [1]. - The management team has a strong technical background, which supports the company's competitive edge in high-end agricultural machinery [1]. - The company has successfully improved its cost control measures, leading to a significant enhancement in net profit margins from 2.2% in 2019 to 8.6% in 2023 [1].