Three major companies released 2020 results last night. Zoomlion’s results is in line with expectation while the positive profit alert in 1Q21E is a positive surprise. SANY Heavy’s results is slightly below estimates due to lower-than-expected gross margin. Weichai’s results is a miss but the recovery of earnings growth in 1Q21E should ease market concern. We maintain our BUY rating for the three names.
- Zoomlion (1157 HK, TP: HK$16.0 / 000157 CH, TP: RMB17.8, BUY) - Net profit in 2020 surged 67% YoY to RMB7.3bn, the mid-point of the range stated in Jan’s profit alert and in line with expectations. Revenue grew 50% YoY to RMB65bn. Operating cash flow in 2020 increased by 19% YoY to RMB7.4bn, similar to the net profit. In 4Q20, net profit surged 80% YoY to RMB1.6bn. Zoomlion proposed a final dividend of RMB0.32 per share. This, together with the interim dividend of RMB0.21, implies a payout ratio of ~58%. Meanwhile, Zoomlion released a positive profit alert for 1Q21E expecting net profit to reach RMB2.2-2.6bn, up 114-153% YoY. This will account for 24-28% of our full year estimates. Reiterate BUY.
- SANY Heavy (600031 CH, BUY, TP: RMB49.5) - Net profit in 2020 grew 36% YoY to RMB15.4bn, 1%/2% below our / consensus estimates. Revenue grew 31%YoY to RMB99bn (in line with expectation), but gross margin narrowed 2.9ppt YoY to 29.8% which is below our estimates. That said, operating expense was under good control with both S&D and administrative expense ratio better than our forecast. Operating cash inflow remained healthy at RMB13.3bn in 2020. Proposed dividend of RMB0.6 per share implies 32.8% payout ratio. Looking into 2021, SANY targets to achieve revenue of RMB120bn (up ~20% YoY), which is higher than our expectation.
- Weichai Power (2338 HK, 000338 CH, BUY, TP: Under review) – Net profit in 2020 only increased 1% YoY to RMB9.2bn, 8%/6% below our / consensus estimates. Revenue in 2020 grew 13% YoY to RMB197bn (in line with expectation). The major discrepancy came from the lower-than-expected gross margin in 4Q20, which dropped 2.3ppt YoY to 18.8%. We believe the weakness came from the weak segment margin of truck sales. Weichai does not propose final dividend but we believe it’s expected given that the A-share placement plan is underway. On the positive side, Weichai released a positive profit alert for 1Q21E, stating that the net profit is expected to surge 40-60% YoY to RMB2.89-3.3bn. This will account for 25-28% of our full year estimate of RMB11.7bn. We stay positive on Weichai and we will provide more updates after the analyst briefing.
