The domestic construction machinery market is still in a period of downward adjustment, in this context, in 2023, the growth of Sany Heavy Industry's revenue scale will continue to be suppressed, however, the net profit attributable to the parent company has seen counter-cyclical growth, and the reduction in operating income and profit can also be preliminarily summarized as the success of the strategic transformation of the new three modernizations - "globalization, digital intelligence, and low-carbonization".
*: Manager Magazine, a subsidiary of Manager Media, reporter Li Qihui.
As the saying goes, high-rise buildings rise from the ground, if you want to get rich first build roads, and construction machinery is widely used in real estate, infrastructure and other fields, therefore, the market performance of construction machinery can often be regarded as a barometer of the economy.
The excavator integrates core technologies such as transmission, electronic control and hydraulics, and can be described as a representative of construction machinery. According to data from the China Construction Machinery Industry Association, the sales volume of excavators in December 2023 was 16,698 units, a year-on-year decrease of 101%, the annual sales of excavators in 2023 will be 195018 units, a year-on-year decrease of 254%。In addition, the Sany Excavator Index shows that the operating rate of construction machinery in the country will be 58 in 202357%, the indicator has a trend of stabilization. However, it is undeniable that the domestic construction machinery market is still in a period of downward adjustment.
The industry is sluggish, and the development pressure of the enterprises in it is self-evident. Sany Heavy Industry Co., Ltd. (600031.)SH) is one of the leading enterprises, and is leading the company through the ups and downs of the industry cycle by carrying out globalization, digital intelligence, and low-carbon transformation.
Extension of product line + outsourcing
Founded in 1994 and successfully listed in 2003, Sany Heavy Industry Co., Ltd. is the first successful and fully circulating enterprise in China's equity division reform, mainly engaged in the research and development, manufacturing, sales and service of construction machinery. In the early stage of development, the company mainly produced concrete machinery products, and then through internal expansion - expansion of excavation machinery, road machinery, integration of professional automobile manufacturing, etc., to external mergers and acquisitions - mergers and acquisitions of Beijing Sany Heavy Machinery (expansion of piling machinery), Austria PALFINGER (expansion of lifting machinery), Germany Putzmeister (expansion of concrete machinery), etc., after more than 30 years of rapid development, and finally established the leading position in the field of construction machinery.
At this stage, Sany Heavy Industry's core products include concrete machinery, excavation machinery, lifting machinery, piling machinery, and road machinery. According to the 2023 semi-annual report, during the reporting period, the revenue of concrete machinery was 839.5 billion RMB, ranking first in the world; Excavation machinery income 151500 million yuan, the 13th consecutive year in the domestic market sales champion, the first domestic market share of ultra-large excavators; Lifting machinery income 73With 6.4 billion yuan, the overall domestic market share of crawler cranes exceeds 40%, and the market share of large and medium-sized crawler cranes ranks first in the country. (Figure 1).
The competitive advantage of products largely comes from two aspects - innovation + service. On the one hand, the company adheres to the concept of "everything comes from innovation", and is committed to the research and development of the world's most cutting-edge technology and the most advanced products of construction machinery, and in the first three quarters of 2023, Sany Heavy Industry spent 42 percent on R&D2.8 billion yuan, accounting for 753%, which is in line with the company's stated goal of investing more than 5% of its sales revenue in R&D every year. The continuous high R&D investment has enabled the company to have a cluster R&D and innovation platform, including a national enterprise technology center, a national postdoctoral research workstation, an academician expert workstation, a nationally recognized test and testing center and other R&D innovation platforms.
It has developed the world's first all-hydraulic motor grader, Asia's first 1000-ton all-terrain crane, China's first hybrid excavator, the world's first all-terrain wind power special truck crane, the world's first 5G technology remote-controlled excavator SY415 and many other high-end equipment manufacturing products representing China. As of the first half of 2023, a total of 17,442 patents have been applied for and 12,614 patents have been authorized.
On the other hand, upgrade services in addition to the layout channels. In China, through the investment company to hold shares in the core dealers, to achieve the binding of interests, at the same time, to connect with consumers to improve the service ability of enterprises. Overseas, the implementation of the "self-oriented, local management, service first" business strategy, "me-oriented": overseas establishment of more than 400 subsidiaries, joint ventures, businessmen, directly facing the consumer market; "Local operation": Hire international employees, and the localization rate of some overseas business units exceeds 90%, and quickly respond to the local market; "Service first": The number of international service outlets exceeded 1,200, creating a back-end rapid supporting service system.
Thanks to the continuous deepening of products + services, the domestic expansion and international development of Sany Heavy Industry have been rapidly promoted. However, due to the strong beta correlation between the construction machinery industry and the infrastructure industry, subject to the cyclical fluctuations of the infrastructure industry, the profitability of Sany Heavy Industry also shows cyclical characteristics.
Profitability is improved
According to the National Bureau of Statistics, the area of new housing starts in the country in 2023 will be 95.4 billion square meters, down 204%；Among them, the area of new residential construction is about 69.3 billion square meters, down 209%。Taking excavators as an example, according to data from China Construction Machinery Industry Association, domestic excavator sales in 2022-2023 will be 151889 and 89,980 respectively, a year-on-year decline. 8%, which also dragged down the performance of Sany Heavy Industry.
Since its operating income reached a record high of 106.9 billion yuan in 2021, Sany Heavy Industry's operating income has retreated for two consecutive years, with an operating income of 808 in 2022200 million yuan, a year-on-year decrease of 2438%, net profit attributable to the parent company 427.3 billion yuan, a year-on-year decrease of 6449%, gross margin to the highest point of 3269% slipped to 2402%。During the period, it was mainly affected by factors such as the slowdown in macroeconomic growth, the insufficient effective operating rate of the project, and the large number of raw materials.
In the first half of 2023, the industry continued its downward adjustment trend, with an operating income of 399100 million yuan, a year-on-year decrease of 033%。It is worth noting that the net profit attributable to the parent company was 3.4 billion yuan, an increase of 29 percent year-on-year07%, that is, there has been a decrease in income and increase in profits, which is analyzed from the financial indicators:
Gross profit margin and net profit margin increased slightly. Since 2023, Sany Heavy Industry's gross profit margin has gradually improved, and the gross profit margin in 2023H1 is 2821%, an increase of 4 from 202219 percentage points, of which, the gross profit margin of excavation machinery reached 3429%, an increase of 9 year-on-year19 percentage points; The gross profit margin of concrete machinery was 2207%, an increase of 1 year-on-year16 percentage points; The gross profit margin of lifting machinery was 25%, an increase of 9% year-on-year33 percentage points. In the same period, the gross profit margin of competitors has also improved, and in the first half of 2023, XCMG Machinery (000425SZ), Zoomlion (000157SZ) gross profit margins were. 90%, an increase of 2 compared with 202265 percentage points and 607 percentage points, Sany Heavy Industry's gross profit margin level is among the best. In addition, in the first half of 2023, Sany Heavy Industry's net profit margin also increased to 885%, an increase of 3 compared to 202235 percentage points, the vicious competition environment in the industry has been inhibited, and the profitability of enterprises has shown signs of stabilizing and rebounding. (Figure 2).
The control of the cost side has been slightly effective. Sany Heavy Industry's expense ratio during 2022 was 1927%, an increase of 4 year-on-year44 percentage points, and the expense ratio for the 2023H1 period is 1547%, down 044 percentage points, a decrease of 38 percentage points. Specifically, the R&D expense rate, sales expense rate, and management expense rate in 2023H1 are. 26%, both of which showed a slight decrease sequentially, while financial expenses were -9RMB8.9 billion was mainly due to the increase in overseas income and significant foreign exchange gains.
In 2023, when the industry continues to be sluggish, cost reduction and efficiency improvement will gradually play a role, which will improve the company's profitability and reflect sufficient resilience in terms of operation quality. The net operating cash flow for the first three quarters of 2020-2023 was 134200 million yuan, 11.9 billion yuan, 409.9 billion yuan, 506.2 billion yuan, and the net profit attributable to the parent company in the same period was 15.4300 million yuan, 120 million300 million yuan, 427.3 billion yuan, 404.8 billion yuan, the net cash ratio basically remained above 1, and the risk management and control were appropriate. Regarding the collection of payments, during the period from 2011 to 2015, the industry ecology deteriorated, the prosperity was sluggish, during which the company's accounts receivable turnover days reached more than 300 days, and the collection ability was very poor, and there was a risk of bad debts at any time. Since 2021, that is, in the current round of industry downturn, the company's accounts receivable turnover days have also lengthened, from a low of 71 days to 120 days, however, the increase is limited and will not go to the worst situation.
In the face of a complex and volatile business environment, the company's measures to adhere to high-quality operation and development have achieved good results in 2023, which is reflected in a significant increase in profitability, stable operation and controllable risks, and leading products to maintain market share leadership. In terms of management, the reduction of costs and profits in business performance can also be preliminarily summarized as the success of the company's strategic transformation of "globalization, digital intelligence, and low-carbonization".
The new "three modernizations" strategy helps transformation and upgrading
On January 26, 2024, at the 6th Sany Group Business Alliance Summit, Xiang Wenbo, the rotating chairman, said, "In the face of many challenges in the industry, Sany is making every effort to carry out globalization, digital intelligence, and low-carbon transformation. "Compared with the past, the internationalization strategy has been upgraded to a globalization strategy, the electrification strategy has been upgraded to a low-carbon strategy, and the digital intelligence strategy has remained unchanged. The implementation of the new "three modernizations" strategy has optimized the company's positioning and business strategy, and has played a great role in promoting the company's cost reduction and efficiency increase.
Globalization is in line with the "third growth curve".
The company upgraded "internationalization" to "globalization". From the perspective of positioning, internationalization is mainly to make domestic business go overseas, globalization is that domestic business is only a part of the company's business, and Sany will be defined as a global enterprise.
In the first half of 2023, the company achieved international sales revenue of 2246.6 billion yuan, a significant increase of 35 percent year-on-year87%, accounting for 56% of total operating income88%。Overseas product sales cover more than 180 countries and regions, and the growth of Asia and Australia is 2207%, the European region increased by 7156% and 22% in the Americas65%, non-growth 1414%。The corresponding gross profit margin reached 3101%, compared with 24 in the same period last year42% up 659 percentage points, higher than the company's overall gross profit margin. Whether it is revenue, profit margin, or scale growth, overseas markets have shown high-quality economics.
On the contrary, the domestic construction machinery industry affected by the sluggish downstream demand, the prosperity continues to decline, such as the excavation machinery mentioned above, the domestic demand growth rate has fallen by more than 40% year-on-year for two consecutive years, and other types of machinery have also shown a downward trend in demand. The comparison of the huge gap between domestic and foreign demand shows that the "globalization" strategy of Sany Heavy Industry has perfectly helped the counter-cyclical adjustment, and the overseas market in globalization is expected to become the company's growth engine through the cycle.
Digital intelligence guides cost reduction and efficiency increase
The digital intelligence strategy includes three aspects: intelligent manufacturing, intelligent products, and intelligent operation. First of all, we will continue to strive to create absolutely leading intelligent products and technologies. In terms of products, intelligent technologies are used, such as intelligent driving, auxiliary operations and maintenance; In terms of scenarios, such as around mines, mixing plants and other special operation scenarios, less people and unmanned driving and operation collaboration are realized. With the digital platform as the carrier, we provide customers with better intelligent services.
Secondly, we should build an intelligent manufacturing platform, develop a self-developed and efficient system, and continue to promote the construction of IIoT infrastructure on the industrial Internet platform, so as to realize the sharing and collaboration of manufacturing resources, efficient operation, and the connection of all factors in production and manufacturing, and finally form a cluster effect.
Finally, promote the global manufacturing layout, promote the domestic intelligent manufacturing technology to overseas manufacturing, and build the core competitiveness of "global manufacturing" from products to industries. At present, three overseas intelligent manufacturing factories in Indonesia, India and the United States have been put into operation. Overseas lighthouse factories have copied and promoted more than 100 domestic advanced manufacturing technologies such as automatic sorting, robot welding, one-click clamping, automatic spraying, automatic tightening, and unmanned distribution, and realized production management through digital systems such as MOM, WMS, APS, and digital twins. Xiang Wenbo, the rotating chairman, said that in 2023, when sales are basically flat, the sharp increase in profits has a lot to do with these large-scale intelligent transformations.
Electrification of the low-carbon strategy
Low-carbon includes low-carbon products, low-carbon factories and businesses, and one of the important directions is product electrification. According to Interact Analysis data, 27% of the world's off-road equipment has been electrified in 2022, mainly forklifts and aerial work platforms, and the penetration rate of excavators, bulldozers, loaders and other electrification is less than 1%. Taking electric loaders as an example, from January to November 2023, loader sales were 94,494 units, a year-on-year decrease of 178%, of which 3,079 electric loaders were sold, an increase of 199% year-on-year, and electrification has major opportunities in the development of the construction machinery industry. (Figure 3).
Sany Heavy Industry comprehensively promotes the electrification of construction vehicles, excavation machinery, loading machinery, concrete machinery, lifting machinery, road machinery and other products. In the first half of 2023, the company has conquered more than 20 key electrification technologies, obtained more than 800 electrification patents, focused on the three major technical routes of pure electric, hybrid and hydrogen fuel, completed the development of more than 50 electric products during the period, and launched more than 40 electrified products. In the field of electrified engineering equipment that can be commercialized, the company has achieved an industry-leading position, such as electric mixer trucks, electric dump trucks, electric cranes, and electric pump trucks, ranking first in the industry in terms of sales market share.
As disclosed in the financial report, the long-term technological upward cycle of construction machinery superimposed on the fourth industrial revolution and the third energy revolution, the industry is in an unprecedented super technology window period, and Sany Heavy Industry is adopting a new "three modernizations" strategy to cope with this change and opportunity, to build high-quality and differentiated products with digital intelligence and low-carbon strategy, and to ensure the continuous growth of the market scale with a globalization strategy.
The Sany Excavator Index is built by Sany Heavy Industry based on the Tree Root Interconnection Root Cloud Platform, which analyzes the working conditions of massive construction machinery and equipment, such as daily operation volume and operating rate, to assist in analyzing the changes in infrastructure investment in various provinces and cities across the country, reflecting the wind direction of economic changes such as infrastructure and fixed asset investment.
Special Tips. The information, tools, opinions, and information contained in this article are only for reading and reference purposes, and do not constitute any investment, legal, accounting or tax final operation advice, and this journal does not make any guarantee for the final operation advice on the content of this article; The cut-off point for this study is February 1, 2024.