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机构：中金公司
研究员：Maoda YANG/Dongping ZHOU/Qing GONG/Yan CHEN
Horizon Construction Development announced its 2024 results: Revenue rose 20% YoY to Rmb11.58bn, and attributable net profit fell 7% YoY to Rmb896mn. The results slightly missed our and market expectations due to the pressure on the firm’s operations in the domestic market.
The number of AWPs under management continued to grow, but prices and occupancy rate were under pressure. In 2024, the number of aerial work platforms (AWP) under management rose from 178,000 units at end-2023 to 216,000 units (+21% YoY). Specifically, the number of self-owned AWPs increased from 121,000 units at end-2023 to 140,000 units, and that of subleased AWPs increased from 57,000 units to 75,000 units. However, the occupancy rate fell 6.2ppt YoY to 74% and rents fell about 10% YoY in 2024. The management scale of support systems and formwork systems remained largely flat, with their occupancy rates rising 2.5ppt and 3ppt to 72.5% and 76.2% YoY. As such, the company's revenue from operating leasing services fell 10% YoY to Rmb4.6bn in 2024.
Engineering technological services and asset management services maintained growth. Revenue from engineering technological services rose 26.5% YoY to Rmb3.75bn as the company increased the efforts to undertake engineering projects, driving up the occupancy rates of support systems and formwork systems. Meanwhile, revenue from asset management services rose 76% YoY to Rmb1.73bn due to increased management scale of subleased vehicles.
GM under pressure due to fierce competition. Gross margin (GM) fell 6.5ppt YoY to 32.6% in 2024, with GM of operating leasing, engineering technological services, and asset management services and others down 6.5ppt, 2.8ppt, and 8.4ppt YoY to 38%, 26%, and 32%.
Selling expenses rose and financial expenses shrank. In 2024, overall expense ratio edged down 0.3ppt YoY to 16.2%, and financial expense ratio fell 1.7ppt YoY to 7ppt (full-year financing interest rate fell 0.11ppt YoY to 4.06%).
EBITDA grew slightly, while profit margin declined. In 2024, EBITDA rose 3% YoY to Rmb4.6bn (EBITDA margin fell 6.6ppt YoY to 40%) and net profit dropped 7% YoY (or down 28% YoY to Rmb693mn, factoring out the impact of the adjustment of the depreciation policy).
Operating cash flow stable; capex high. Net operating cash flow rose Rmb254mn YoY to Rmb4.2bn and capex rose Rmb5bn YoY to Rmb7.1bn.
Debt-to-asset ratio rose slightly. Due to increased capex, the debt-to- asset ratio rose 3.1ppt from the end of 2023 to 68.6%
Dividend payment: The firm announced that it would pay a dividend of HK$0.045/sh in July.
Trends to watch
Integration and adjustment of domestic AWP industry underway; overseas expansion accelerates. Looking ahead, we believe the supply- demand imbalance in the domestic AWP industry will likely continue to weigh on corporate earnings in 2025. However, the firm has stepped up efforts to expand its overseas presence to offset the operational pressure in the domestic market. At present, the company has assets of over Rmb3bn and a team of 680 employees in overseas markets (with overseas revenue of Rmb389mn and net profit of Rmb79mn in 2024). We are optimistic that overseas markets will become a new growth driver for the company and a major contributor to its earnings. The firm targets overseas revenue of Rmb1bn and assets of Rmb5bn in 2025.
Financials and valuation
As demand is under pressure, we cut our 2025 net profit forecast 22% to Rmb903mn and introduce our 2026 earnings forecast of Rmb954mn. The stock is trading at 4.4x 2025e and 4.0x 2026e EV/EBITDA. Given the firm's position as an industry leader, its low valuation, and recovering risk appetite in the Hong Kong stock market, we maintain an OUTPERFORM rating and our target price, implying 4.9x 2025e and 4.5x 2026e EV/EBITDA, offering 53% upside.
Risks
Increased pressure on the operations of the AWP business segment; disappointing overseas expansion.
