Hydraulic cylinder "little giant", three core products go hand in hand

Release time:

2023-07-25

Event: The Company releases its 2023 semi-annual report. 23H1 company's three core businesses all achieved positive growth, with total revenue of 0.34 billion yuan, +63.7% YoY, net profit of 36.106 million yuan, +86.1% YoY, of which single Q2 revenue of 0.19 billion yuan, +70.8% YoY, and net profit of 20.755 million yuan, +73.0% YoY.

The mining equipment market continues to develop, machinery and equipment cylinders are expected to benefit. Benefiting from the increase in capital investment and the release of advanced production capacity in the coal industry, the demand in the industry is strong. Relying on years of technology accumulation and process accumulation, and the advantages of the whole chain processing industry, the company's production capacity has been effectively brought into play. The revenue from mining equipment cylinders has increased significantly year on year, driving up the overall revenue from machinery equipment cylinders. 23H1 Company's revenue from machinery equipment cylinders has reached 0.24 billion yuan (+89.1). At present, the company's "annual output of 7000 sets of excavator special high-pressure cylinder project" has been put into use, with the production capacity climbing, the company's mechanical equipment cylinder product revenue is expected to further upward.

The oil and gas spring market is broad, the penetration rate continues to increase, and the release of production capacity will enter the fast lane of growth. After market verification in recent years, the company's oil-gas spring products have been recognized by the market. Downstream customers have gradually promoted the use of oil-gas suspension, and the market scale has expanded. At the same time, it has rapidly penetrated into new energy vehicles. In the military field, with the smooth development of trial production and follow-up of a number of "military multi-bridge heavy-duty vehicles" and "a certain type of amphibious armored vehicle", product orders are expected to further increase. The company's "annual output of 20000 heavy-duty vehicle oil and gas spring project" was completed in November 2022, production capacity gradually released, 23H1 oil and gas spring products to achieve revenue of 23.879 million yuan (135.1). In the future, with the release of capacity climbing, it is expected to continue the high growth trend.

Commercial truck demand rebounded, dump truck special cylinder bottom rebound. According to the China Automobile Association data, China's commercial truck sales experienced a continuous decline in 2021-2022, the market has rebounded, 2023H1 sales reached 1.751 million units, an increase of 15.3 percent year-on-year, the improvement is obvious, driving the dump truck special cylinder sales growth. At the same time, the company's dump truck special cylinder overseas sales continued to maintain year-on-year growth. 23H1 company dump truck special cylinder to achieve a total income of 62.456 million yuan (+11.0%).

Earnings forecasts and investment recommendations. We expect the company's 23-25 years of home-to-home net profit of about 0.9/1.1/0.13 billion yuan, the next three years of home-to-home net profit compound growth rate is expected to reach 27.9. Considering that the company has relatively perfect and mature technology in the fields of dump truck oil cylinders and mechanical equipment oil cylinders, and has certain brand, upstream and downstream resources and customer channel advantages, oil-gas spring products are expected to create a second growth curve. At the same time, considering the liquidity differences between different markets, the company is given a 10-fold PE valuation in 2024, corresponding to a target price of 9.50 yuan, with a "buy" rating for the first coverage.

Risk Warning: Risk of macroeconomic fluctuations, risk of increased market competition, risk of raw material price fluctuations.

Source: Southwest Securities