【行业研究报告】潍柴动力-4Q23 net profit +58% YoY; Payout increased to 50%; Higher earnings forecast on margin

26Mar202426Mar2024CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateWeichaiPower(2338HK)4Q23netprofit+58%YoY;Payoutincreasedto50%;HigherearningsforecastonmarginWeichai’snetprofitin2023surged84%YoYtoRMB9bn,whichisinlinewiththeprofitrangeofRMB8.58-9.32bnannouncedinJan.In4Q23,netprofitgrew58%YoYtoRMB2.5bn.It’sworthnotingthatWeichaihasdeclaredafinaldividendofRMB0.293/shr.This,togetherwiththeinterimdividend,impliesthatthepayoutratiohasreached50%(upfrom45%in2022).Wereviseupour2024E/25Eearningsforecastby19%/20%,mainlyduetohighermarginassumptionsacrossdifferentsegments.WemaintainourpositivestanceonWeichai(sectortoppick)aswesee(1)thereplacementcycle,(2)highersalescontributionofgastrucks,and(3)exportsofferingcertaintyonHDTindustrysalesgrowthin2024E.WereviseupourSOTP-basedTPforWeichaiH/AtoHK$22/RMB20.4fromHK19.4/RMB17.8.MaintainBUY.Keyhighlightsin4Q23.Netprofitgrew58%YoYtoRMB2.5bn,drivenby20%YoYrevenuegrowth(toRMB53.6bn)and3.3pptYoYgrossmarginexpansion(to23.7%).Thegrossmarginin4Q23isthehighestonesince4Q18.Strongenginegrowthin2023.Thesegmentrevenuegrew55%YoYtoRMB60.8bn,drivenbya28%increaseinenginesalesandincreaseinblendedASP(duetomorecontributionofHDTenginesbasedonourestimate).Thesegmentprofitsurged1.7xYoYtoRMB7.7bn,drivenby5.5pptYoYexpansionofsegmentmargin.Automobiles&componentsturnedtoprofitin2H23.Thesegment(mainlyincludesHDTsandparts)recordedRMB610mnofsegmentprofitin2H23(vsRMB24mnin2H22and-RMB16mnin1H23),drivenbyoperatingleverage.Forklifts&supplychainsolution(KION’soperation)continuedtoseerecovery.Thesegmentprofitsurged10xYoYtoRMB4.9bnin2023fromalowbase.AccordingtoKION’slatestguidance,theadjustedEBITisexpectedtogrow0-19%YoYin2024E.Agriculturalmachineryhelpedbybettermargin.Whilethesegmentrevenuedropped9%YoYtoRMB16.2bnin2023,thesegmentmarginexpanded1pptYoYto4.1%.Thishelpedboostthesegmentprofitby23%YoY.Riskfactors:1)weaknessinengineexports;2)lower-than-expectedreplacementdemand;3)anincreaseincomponentcosts.TargetPriceHK$22.00(PreviousTPHK$19.40)Up/Downside44.0%CurrentPriceHK$15.28ChinaCapitalGoodsWayneFUNG,CFA(852)39000826waynefung@cmbi.com.hkStockDataMktCap(HK$mn)133,341.8Avg3mthst/o(HK$mn)147.052wHigh/Low(HK$)15.76/9.49TotalIssuedShares(mn)8726.6Source:FactSetShareholdingStructureWeichaiHoldingsGroup16.3%WeifangInvestmentGroup3.4%Source:HKExSharePerformanceAbsoluteRelative1-mth-0.3%1.3%3-mth20.3%19.3%6-mth41.7%52.5%Source:FactSet12-mthPricePerformanceSource:FactSetRelatedreports:CapitalGoods–Expansionofgas/dieselpricespreadlikelytoboostnaturalgasHDTsalesinthenearterm–5Mar2024(link)CapitalGoods–EquipmentreplacementproposedinCentralgovernmentmeeting;positivetoHDTsector–26Feb2024(link)WeichaiPower–4Q23Eearningssurged31-71%YoY,aboveexpectation–24Jan2024(A:link)(H:link)ChinaHeavyDutyTruck–Multi-cylinderdieselenginesales+29%YoYinDec–15Jan2024(link)EarningsSummary(YE31Dec)FY22AFY23AFY24EFY25EFY26ERevenue(RMBmn)175,158213,958236,291250,085260,023YoYgrowth(%)(13.9)22.210.45.84.0Adjustednetprofit(RMBmn)4,905.59,013.912,116.613,051.313,768.2EPS(Reported)(RMB)0.561.031.391.501.58YoYgrowth(%)(47.0)83.834.47.75.5ConsensusEPS(RMB)nana1.281.45naP/E(x)17.110.310.19.48.9P/B(x)1.11.21.41.31.2Yield(%)2.64.94.95.30.0Netgearing(%)(35.8)(62.0)(66.1)(79.1)(91.5)Source:Companydata,Bloomberg,CMBIGMestimates