Xugong Machinery (000425): Estimated improvement in profitability, mixed reforms, and asset injection expectations

Guide to this report: Infrastructure construction, mining investment growth picking up, stricter environmental protection, judging that the high prosperity of the industry continues; historical burdens are basically cleared, profitability is recovering, and performance flexibility is outstanding; mixed reform is accelerating, asset investment such as excavators is injected, and PB is expectedRevaluation.

Key points of investment: Conclusion: Infrastructure construction, mining investment growth has picked up, environmental protection has become stricter, and the high prosperity of the industry is judged to be sustainable; historical burdens have been basically cleared, profitability has rebounded, and performance flexibility has appeared.

Taking into account the accrual factor, the EPS for 18 years is reduced to 0.

26 (-0.

01) Yuan, maintaining EPS 0 for 19-20 years.


52 yuan; based on the acceleration of mixed reforms, the expected injection of excavator assets, raise the target price to 6.

3 yuan, corresponding to 19 times PE in 19 years, increase holdings.

The growth rate of infrastructure construction and mining investment rebounded, judging that the construction machinery continued to be booming.

We believe that the growth rate of construction machinery ownership is related to the growth rate of investment. The growth rate of investment in infrastructure, mines, and real estate from January to February was 4.

3%, 41.

4%, 10.

6%, an increase of 0 from the previous value.

5 pieces, 37 pieces

3pct, 2.

3pct, judging the 19-year countercyclical adjustment and strengthening, the growth rate of infrastructure has increased significantly; the mining industry ‘s net interest rate is at an historical high, and the investment boom is expected to continue; the equipment investment payback period has brought about increased buying confidence, and judged that the 19-year inventory growth rate has increased.
At the same time, excavators and cranes will start the next stage of environmental protection standards, and the update rate is expected to rise steadily.

Overall, it is estimated that the domestic sales growth rate of excavators and cranes will be 5 in 19 years.

4%, 20.


Historical burdens have basically cleared, ROE has rebounded significantly, and mixed reforms and asset injections are expected to improve estimates.

Subject to historical baggage, the 18-year profit elasticity has not yet been released.

We estimate the disposal of mortgage loans and financial leases with repurchase obligations over 16 years28.

900 million, 79.

700 million, and the balance of the two types of loan guarantees at the end of 15 was 13.

4 billion, 89.

900 million, based on this judgment, the historical burden is basically cleared.

Under the effect of scale, it is expected that in 19 years of lifting machinery, the net interest rate of pile machinery is expected to rise to about 10% and 5% (the historical highs are 15 respectively.

9% and 6.

5%), profitability will be significantly improved, currently the company’s PB is only 1.

48 times (18Q3 for BPS), which is far lower than the industry average. A rebound 杭州桑拿 in ROE is expected to bring PB revaluation.

Catalysts: mixed reforms, increased holdings, and buybacks.

Risk reminder: rapid growth in real estate investment growth, competition in the construction machinery industry deteriorates