ANHUI HELI(600761)：ELECTRIC FORKLIFTS HELP ENHANCE GLOBAL COMPETITIVENESS

机构：中信证券
研究员：LIU Haibo/LI Yue/LI Ruipeng

　　Core views:
　　As the largest forklift manufacturer in China, Heli stands well to benefit from four tailwinds at this point: 1) Domestic demand recovery appears imminent; 2) Electric counterbalanced forklifts have become increasingly popular and the growth rate of revenue outpaces that of sales; 3) Falling steel prices could enhance profitability; 4) The global competitiveness of China-made forklifts is enhanced by the adoption of lithium-ion batteries. We expect the Company's 2022E/23E/24E attributable net profit (ANP) to be Rmb0.85bn/1.20bn/1.59bn, respectively, implying a CAGR of 37%. Considering the current industry prosperity, the market scale expansion brought by electrification and the Company's own growth prospects, we assign 15x 2022E PE to derive a target market cap of Rmb12.7bn and a target price of Rmb17. The Company will likely maintain high earnings growth in the next 2~3 years, while its current market value is significantly lower than the target value. We initiate coverage with a “BUY” rating.
　　Abstract:
　　Company overview: Largest forklift manufacturer in China. Heli is mainly engaged in the R&D, manufacture and sales of forklifts and other industrial vehicles and key components. From the perspective of revenue structure, almost all of its revenue comes from the forklift business. In the past 20 years, Heli's business scale has continued to grow steadily. Its revenue has increased by about 35 times since its listing in 1996, and the sales volume of forklifts exceeded 200k units in 2021, maintaining the first place by market share over the years. In 2021, Heli achieved revenue of Rmb15.42bn (+20.5% YoY), of which revenue from overseas markets reached Rmb2.96bn (+56.2% YoY) and accounted for 19.2% of its total revenue.
　　Industry analysis: Imminent recovery and rising competitiveness. 1)The recovery of domestic demand appears imminent: Forklift demand mainly comes from the manufacturing and logistics industries. China's forklift sales grew from 314k units in 2011 to 1,099k units in 2021, with a CAGR of 13.3%. Benefiting from the three major logics of expanding the scale of the domestic manufacturing and logistics industries, increasing the penetration rate and boosting global competitiveness, we expect that China's forklift sales will still maintain a CAGR of about 10% over the next 5~10 years. Meanwhile, short-term demand for forklifts is consistent with economic sentiment indicators such as PMI. Historically, there has been an industry demand cycle of about 3 years. The current forklift downcycle started in 3Q21, and the pandemic in 2Q22 aggravated the demand slump, but with the control of the pandemic and the recovery of production in China, forklift demand is likely to gradually recover and enter the upcycle from 4Q22. 2) Electric forklifts help improve Chinese enterprises’ global competitiveness: With the continuous maturity of lithium battery technology, lithium batteries have gradually replaced lead-acid batteries as the mainstream technology route of electric forklifts, and the share of lithium battery-powered forklifts in electric counterbalanced forklifts and electric walk-behind forklifts in China reached 42.8% and 53.2%, respectively, in 2021. In the past, China's forklift exports mainly consisted of small-value electric walk-behind forklifts (accounting for 60% of export by unit in 2020). In the field of high-value counterbalanced forklifts, Chinese enterprises have technical disadvantages compared with overseas giants Toyota and KION. However, with the development of lithium battery-powered counterbalanced forklifts and rising oil prices, China's forklift manufacturers have gained significant competitive advantages in the field of electric counterbalanced forklifts by using the mature domestic technology along the new energy vehicle (NEV) industry chain and may surpass overseas giants going forward. High-value electric counterbalanced forklift is another new advantageous field for Chinese enterprises.
　　Company analysis: Riding on four tailwinds. 1) Domestic demand recovery: With the control of Covid-19 and production recovery in China in 3Q22, domestic forklift demand is likely to gradually recover starting from 4Q22. 2) Ramp-up of higher-value electric counterbalanced forklifts: Domestic counterbalanced forklifts are rapidly electrified, and the penetration rate of electric counterbalanced forklifts in China grew from 16.4% in 2020 to 21.9% in the first five months of 2022, and there is still more room for improvement compared to the 58% penetration rate in Europe. The average selling price (ASP) of electric counterbalanced forklifts is basically 1 time that of fuel counterbalanced forklifts, and with the rapid electrification of counterbalanced forklifts, Heli's revenue growth is likely to outpace shipment growth. We expect Heli's forklift shipment to grow by about 10% YoY in 2023. Considering the increase in the domestic penetration of high-value electric counterbalanced forklifts, we expect Heli's domestic revenue to grow by about 15% YoY in 2023. The Company’s export revenue grew by 68% YoY in 1H22. Despite the current economic recession in Europe caused by the war between Russia and Ukraine and other unfavorable factors, we expect that Heli's overseas share will continue to increase in 2023 and the revenue growth rate of the export business is likely to maintain 20%, considering that the market share of Heli's products in the US and Europe is less than 5%, and cost-effective products such as electric counterbalanced forklifts have better competitiveness. Overall the total revenue of the Company is likely to grow by about 17% YoY in 2023. 3) Falling steel prices, which helps bolster profit margins: Steel prices have dropped significantly since 2Q22. Heli's gross profit margin was only 15% in 2021. Since steel accounts for about 40% of its total cost, steel price declines will significantly improve its gross/net profit margin. 4) Convertible bond offering plan: Heli intends to issue Rmb2.2bn convertible bonds to accelerate the construction of core projects. After the completion of the project, the Company will have new forklift annual production capacity of more than 100k units, which will significantly improve the production capacity of key components and create a discrete industrial vehicle intelligent manufacturing system to achieve its goal of “growing the forklift production capacity to more than 500k units by 2025”.
　　Potential risks: Macroeconomic growth slides; significant fluctuations in international trade policies and exchange rates; significant increases in raw material costs; declining gross profit margins due to intensified industry competition; longer order delivery cycles due to local pandemic spread; intensified overseas pandemic situation, etc.
　　Investment recommendation: As the largest forklift manufacturer in China, Heli benefits from four tailwinds at this point: 1) Domestic demand recovery appears imminent; 2) Electric counterbalanced forklifts have become increasingly popular and the growth rate of revenue outpaces that of sales; 3) Falling steel prices could enhance profitability; 4) The global competitiveness of China-made forklifts is enhanced by the adoption of lithium-ion batteries. We expect the Company's 2022E/23E/24E ANP to be Rmb0.85bn/1.20bn/1.59bn, respectively, implying a CAGR of 37%. Considering the current industry prosperity, future market expansion and Heli's own growth prospects, and based on the Wind consensus valuation of comparable companies including Hangcha Group (603298.SH, 11x 2022E PE), Dingli Machinery (603338.SH, 15x 2022E PE) and Noblelift Intelligent Equipment (603611.SH, 10x 2022E PE), as well as the PEG valuation results (we use the average 2022E PEG multiple of comparable companies, 0.49x, and Heli’s estimated earnings growth of 37%, to derive a multiple of 18x 2022E PE for the Company), we assign 15x 2022E PE-per peer average PE and PEG-to derive a target market cap of Rmb12.7bn and a target price of Rmb17. Heli will likely maintain high earnings growth in the next 2~3 years, while its current market value is significantly lower than the target value. We initiate coverage with a “BUY” rating.