HORIZON CD(9930.HK)：BACK TO CAPEX GROWTH MODEL TO ACHIEVE PRODUCT DIVERSIFICATION & OVERSEAS EXPANSION-格隆汇

机构：招银国际
研究员：Wayne FUNG

Horizon CD’s core net profit in 1H24 dropped 16% YoY to RMB268mn, largely in line with our expectation. Horizon CD proposed HK$0.04/ share of interim dividend, the first time since listing. While Horizon CD maintains the asset-light model for its aerial work platform (AWP) leasing business in China, it is expanding the equipment portfolio through investing in material handling equipment and mining equipment, which took its capex up 3.6x YoY to RMB4.4bn in 1H24. Meanwhile, Horizon CD continues to see oversea markets as the growth driver (35 outlets as at end-Jun). We therefore forecast the net debt/equity ratio to rebound in 2024E. We revise down our 2024E/25E/26E earnings forecast by 2%/10%/12%, largely due to higher finance expense projections. We slightly cut our TP to HK$3.6 from HK$3.7, based on unchanged 10x 2024E P/E. Trading at <4x 2024E P/E, we think the downside risk is limited. n Key highlights in 1H24 results: Revenue grew 16% YoY to RMB4.9bn.
Gross margin contracted 2.1ppt YoY to 32%, as the 6.3ppt margin expansion of engineering service segment was offset by the contraction of operating lease (-2.5ppt) and asset management segment (-5.3ppt). Selling & distribution expense ratio increased 2.5ppt YoY to 5.4%. The net expected credit loss (ECL) ratio slightly dropped 0.5ppt YoY to 3.5%. Excluding the listing expense and interest expense & FX change from the redemption liabilities on pre-IPO investment in 1H23, core net profit in 1H24 dropped 16% YoY to RMB268mn. Operating cash inflow increased 4% YoY to RMB1.35bn. With investing cash outflow of RMB3.1bn, net debt to equity ratio rebounded to 164% at end-Jun (vs 147% at end-2023).
Operating lease services (39% of revenue). The segment revenue dropped 24% YoY to RMB1.9bn in 1H24, largely due to the decrease in rental rates and overall utilisation rate of AWPs that offset the increase in equipment volume and utilisation rate of neo-excavation systems and neo- formwork systems.
Engineering & technical services (40% of revenue). The segment revenue surged 71% YoY to RMB1.95bn in 1H24, with gross margin expanding by 6.3ppt YoY to 27%.
Asset management & other services (21% of revenue). The segment revenue surged 84% YoY to RMB1bn in 1H24. Breakdown: (1) Asset management service revenue surged 1.5x YoY to RMB744mn, driven by the adoption of an asset-light model for AWPs. The managed fleet size of AWPs grew >1.6x YoY to 73k units. (2) Trade and others revenue grew 10% YoY to RMB287mn. The segment gross margin contracted 5.3ppt YoY to 32%.