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预计 2023E 收益稳健；更高的自由流通股将提升估值

2024-01-10 Wayne Fung 招银国际 Zt

Horizon CD, a leading asset-light model equipment operator, is expected to report strong earnings for 2023, with an estimated core net profit of RMB1 billion, marking a 20% year-over-year (YoY) increase. This robust performance is attributed to the company's strategic shift towards an asset-light model, which led to a significant reduction in capital expenditure (capex) to approximately RMB1 billion for 2023, down from earlier forecasts of over RMB4 billion. Despite trimming its earnings forecast by 3% in 2024 and 12% in 2025 due to lower capex assumptions, the company is anticipated to experience a surge in free cash flow, potentially reducing the net debt-to-equity ratio to 106% by the end of 2025 from 159% at the end of June 2023.

Overseas expansion is identified as a key growth driver, with plans to establish 20 service outlets by 2024, up from five in 2023. This initiative is expected to capitalize on the higher pricing available in international markets compared to China. The distribution of Horizon's shares by Far East Horizon on January 16 could also provide a boost to trading volume and valuation.

The target price was revised upwards to HK$5.2 from HK$4.8, based on a 13x P/E ratio, aligning with Huatie's two-year average valuation. This adjustment reflects the transition to a more asset-light business model, reduced balance sheet risk, and improved liquidity.

Horizon CD is poised to add 30-50,000 units to its fleet in 2024, primarily through re-renting, further fueling its growth trajectory. With a focus on expanding its overseas presence and optimizing its operational efficiency, the company is well-positioned for continued success in the years ahead.

Expect solid 2023E earnings; Higher free floatto boostvaluation Target PriceHK$5.20(Previous TPHK$4.80)Up/Downside15.8%Current PriceHK$4.49 HorizonCDwill release2023E earnings on 12 Mar. We expect HorizonCDtodeliver core net profit of RMB1bn (+20% YoY). Given the transformation toasset-light model, we expect HorizonCDsubstantially scaledbackthe capexin2023Eto ~RMB1bn (from our previous forecast of >RMB4bn).While we trim ourearnings forecastby 3%/12%in 2024E/25E on lower capex assumptions, wesee stronger free cash flow going forward, which potentiallyhelpsreduce thenet debt/equity ratio to 106% by end-2025E (versus 159% as at end-Jun 2023).We see overseas as a new growth driver as HorizonCDtargets to establish 20service outletsin 2024E (up fromfivein 2023E). In the near term,the distributionof Horizon’s shareson 16 JanbyFar EastHorizon(3360 HK, BUY, coveredby Finance team)willpotentiallyboost trading volume and valuation. MaintainBUYwithanew TP of HK$5.2. China Capital Goods Wayne FUNG, CFA(852) 3900 0826waynefung@cmbi.com.hk 2023E earnings preview:We forecastrevenuegrowth of 13% YoY, on theback of fast growing platform servicerevenue.Excluding the listing expenseas well as the interest expense and FX change from the redemptionliabilities on pre-IPO investment,we estimatecore net profitof RMB1bn. Shareholding Structure Growth of AWP fleet size through re-renting.We expectHorizonCDhasbuiltup a fleet of 180k units by end-2023E, including ~50 units entrusted byother equipment owners (i.e. re-renting). We forecast Horizon to add 30-50kunits in 2024E, which will be largely by re-renting. Overseasexpansion a growth driver.We estimate Horizon CDestablishedfiveservice outlets in overseas in 2023E. HorizonCD hasalreadystartedofferingoperating lease services in some overseas areas.Horizon targets to take the overseas service outlets number to 20 in 2024E,covering regions such as Saudi Arabia, Turkey, Dubai etc. We understandthat the pricing in some overseas markets is much higher than that in China. Higher free floatto boost turnover.Far East Horizon is the controllingshareholder of HorizonCD. In the EGM held in late Dec,shareholders ofFar East Horizonapproved the plan to distribute 160mn shares ofHorizonCDthrough special dividend. Every 27 shares held by Far East Horizon’sshareholder will be eligible toobtainoneshare of HorizonCD.The shares(5% of Horizon’s total o/s shares) will bedistributedon16 Jan. Related reports:Horizon CD-1H23 core profit +10% YoY; positive on the structural growthand mgmt. execution–9 Aug 2023(link) Maintain BUY.We revise up our TP to HK$5.2 (previously HK$4.8), basedon 13x P/E which is equivalent to the two-year average ofHuatie (603300CH, NR), the major peer of HorizonCD. Our higher TP is to reflect (1) therollover of valuation base to 2024E, (2) the lower risk of balance sheet as aresult of the adoption of asset-light model, and (3)better liquidity. HorizonCD-No.1equipmentoperation service provider ready tocapture theopportunities in AWP–5Jul 2023 (link) Source:Company data,CMBIGMestimates Source: Company data,CMBIGMestimates Source:Bloomberg,CMBIGM Key risks:(1) reduction of rental ratesand utilisation rates; (2) weakness ofmanufacturing capex;and(3) unsuccessful overseas expansion. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primaryresponsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about thesubject securitiesor issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst inthis report.Besides, the analyst confirms that neither the analyst norhis/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issueof this report;(2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve asan officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interestsin the Hong Kong listed companiescovered in this report.CMBIGM or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months. CMBIGMRatings BUY : Stock with potential return ofover 15% over next 12 months: Stock with potential return of +15% to-10% over next 12 months: Stock with potential loss of over 10% over next 12 months: Stock is not rated byCMBIGM HOLDSELLNOT RATED OUTPERFORMMARKET-PERFORMUNDERPERFORM :Industry expectedto outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad

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