Sany Heavy Industry Co., Ltd. (600031): Operating fundamentals continue to improve, debt redemption, equity dilution, and limited impact

Sany Heavy Industry Co., Ltd. (600031): Operating fundamentals continue to improve, debt redemption, equity dilution, and limited impact

Core point of view The company issued a reminder announcement regarding the early redemption of convertible bonds, and the board of directors decided to exercise the company’s early redemption right for the convertible bonds and redeem all the Sany convertible bonds registered on the “redemption registration date”.

The impact of redemption on the dilution of equity is limited, and the company’s balance sheet has been improved in accordance with the terms of the baseline bond offering. The company has decided to exercise the right of early redemption and redeem all the SANY convertible bonds registered on the “redemption registration date”.

The latest bond balance of SANY Convertible Bonds was 28.

500 million, according to 7.

The conversion cost of 25 yuan / share will increase the share capital3.

9.3 billion shares, with a diluted ratio of approximately 5.

04%, limited impact on equity dilution.

For the shareholders of the company, it can save interest expenses, reduce the asset-liability ratio, and increase the equity of the company’s balance sheet, which will increase the company’s ability to compensate in the future.

The current demand boom continues, and the strong spring sales show that the fundamentals of the business continue to improve. From our recent micro-tracking, we showed that the growth rate of excavator sales accelerated in February. The overall sales growth rate in the first quarter of 2019 is expected to exceed 20%. The current terminal demand boomDegrees last.

The company’s operating fundamentals have continued to improve. According to data from the Construction Machinery Association, excavator sales increased by 10% in January 2019, and Sany Heavy Industry achieved sales of 3,324 units, an increase of 48.

9% market share from 23 at the end of 2018.

1% increased to 28.

3%, achieved 695 truck crane sales, an increase of 48 year-on-year.

8%, with a market share of 22 from the end of 2018.

4% increased to 26%.

The continuous expansion of market share shows the company’s comprehensive competitive advantages such as product power and channel capabilities.

Investment suggestion: We predict that the company will achieve operating income of 536/637/660 trillion from 2018 to 2020, and the EPS will be 0.

79/1.

14/1.

22 yuan / share, corresponding to the current sustainable PE of 13x / 9.

1x / 8.

5 times.

With reference to the average estimated level of domestic counterparts at around 11x, as the company is a leader in domestic construction machinery, its market share is rapidly increasing (the rate of change has been increasing since 2019), and the company is penetrating from domestic to the global market.PE, reasonable value is 12.

54 yuan / share, we continue to maintain the company’s “Buy” rating.

Risk reminders: Increased demand for infrastructure and real estate investment; intense industry competition leading to a decline in gross profit margin; terminal price competition leading to increased risk of accounts receivable; less-than-expected release of 杭州桑拿 production capacity and insufficient supply.