XCMG: Better-than-expected start-up performance in the first quarter

The company released the first quarter of 2011 pre-announcements of earnings growth. The sales revenue in the first quarter showed a substantial increase over the same period of last year. The company expects the net profit attributable to the parent company in the first quarter of 2011 to be between RMB 10,000 and RMB 1.7 billion, an increase of 98% to 117% year-on-year. Based on the latest share capital, the company will achieve an EPS of RMB 0.485 to RMB 0.533.

The construction crane business maintains rapid growth. According to the data from the Construction Machinery Association, 1,050 vehicles and 1,515 vehicles were sold in January and February respectively, up 5.3% and 43.2% year-on-year respectively, and up 44.2% in February from the previous month. In the first two months, 2,565 units were sold, up 24.8% year-on-year. , slightly lower than the industry's 29.5% growth rate, the market share of 48.35%; with the cumulative sales of 590 cranes, an increase of 45.3%, market share rose to 52.2%; of which 309 sales in February, an increase of 42.4% Crawler cranes sold 65 units, an increase of 80.55% year-on-year. We believe that the company will increase its sales efforts during the peak sales season in March, and crane sales will still maintain a growth rate of around 15%.

The market demand for concrete machinery industry is strong. In recent years, the company has focused on the development of concrete machinery and road machinery. With the acceleration of urbanization in China's second-tier and third-tier cities, accelerated capital investment in the central and western regions, and increasing commercialization rate of concrete, the market demand for concrete machinery mainly comes from the increase in demand penetration. Replacing demand, it is expected that the sales growth of concrete machinery in 2011 will reach about 50%. With the company's new large-scale concrete machinery base and mixing plant base major technical transformation projects in succession to start production, the sales growth of concrete machinery will far exceed the growth of the industry.

The market share of compaction machinery and road machinery continued to be stable. The domestic market share of compacted machinery and road machinery of the company reached 28.1% and 21.8%, respectively, ranking first in the industry. In the first two months, the company sold 837 rollers, a year-on-year increase of 75.5%, a growth rate faster than 50.9%, and a slight increase in market share of 28.9%.

Product structure optimization, gross profit margin is expected to rise steadily. In 2010, the company's comprehensive gross profit margin was 21.69%, an increase of 2.33 percentage points year-on-year. The company actively adjusted its product mix, actively developed concrete machinery, and developed its cranes to large-scale and heavy-duty operations. It also fully explored domestic and foreign markets for foreign investment, reduced costs and tapped potentials, and increased its share of heavy-duty and high-margin products in the future. The company's comprehensive profitability will be further enhanced.

Earnings forecast and investment rating. We expect the company's net profit for 2011-2013 to be 3,893.1, 4,954.3, 6,132.2 million yuan, a year-on-year increase of 33.0%, 27.3%, and 23.8%, and the fully diluted EPS will be 1.89, 2.40, and 2.97 yuan, respectively, and the company will close on April 11th. The price is 28.50 yuan, we value it according to 18 times of PE in 2011, and the reasonable stock price is 34.02 yuan. Maintain “Buy-A” investment rating.

risk warning. The slowdown in infrastructure investment such as railway construction will reduce the company’s crane demand; raw material price fluctuations and the entry of competitors will intensify competition in the industry.