FIRST TRACTOR(SH:601038) EBSCN·2025-04-02 10:32Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for future investment returns exceeding the market benchmark by more than 15% over the next 6-12 months [6]. Core Views - The company experienced a slight increase in revenue but a decline in net profit, attributed to a weak agricultural machinery market and increased promotional efforts to gain market share [1][2]. - Long-term demand for agricultural machinery is expected to grow due to three main factors: government subsidies, land transfer policies, and stable grain prices, which enhance the attractiveness of machinery investments [3]. - The trend towards larger and higher-end tractors is evident, with the proportion of large tractors increasing from 19.4% in 2023 to 22.8% in 2024, indicating a shift in market dynamics [3]. Summary by Sections Financial Performance - In 2024, the company achieved revenue of 11.9 billion yuan, a year-on-year increase of 3.3%, while net profit was 922 million yuan, a decrease of 7.5% [1]. - The sales gross margin was 14.8%, down 1.1 percentage points year-on-year, and the net profit margin was 7.8%, down 0.9 percentage points [1]. - The fourth quarter of 2024 saw a revenue drop of 8.9% year-on-year and a significant 60.1% decline quarter-on-quarter, resulting in a net loss of 1.8 billion yuan [1]. Market Trends - The total tractor production in China for 2024 is projected at 489,000 units, a decrease of 11.3% year-on-year, marking the lowest level in three years [2]. - The company’s agricultural machinery business gross margin was 13.6%, down 0.7 percentage points, while the power machinery business gross margin increased by 1.2 percentage points to 11.0% [2]. Future Outlook - The company has adjusted its net profit forecasts for 2025 and 2026 downwards by 19.3% and 22.7%, respectively, but anticipates benefiting from the ongoing trend towards high-end and large tractors [4]. - The report projects net profits of 1.05 billion yuan for 2025 and 1.14 billion yuan for 2026, with corresponding EPS of 0.94 yuan and 1.02 yuan [4][5]. - The company is expected to benefit from the growing trend of exporting agricultural machinery, with a 19.7% year-on-year increase in tractor exports in early 2025 [3].