Author: Zhou Yuan / Wall Street News

ZPMC's recently released 2024 annual report shows that as the leading enterprise with the largest market share in the global port machinery market, ZPMC achieved an annual operating income of 33.456 billion yuan during the reporting period, a year-on-year increase of 4.62%, marking the fourth consecutive year of growth.

Although its net profit attributable to shareholders was 534 million yuan, it only increased by 2.6% year-on-year, and the growth rate significantly slowed from 39.8% in 2023. The net profit after deducting non-recurring items fell by 23% year-on-year to 211 million yuan.

Overall, while ZPMC's revenue scale has continued to grow (last year's revenue reached a three-year high), the growth rate of net profit and gross margin (the gross margin for 2024 decreased by 0.76 percentage points year-on-year to 12.76%) has been declining, and the contribution from emerging businesses is insufficient, reflecting the deep challenges faced by traditional manufacturing in the context of technological upgrades and global changes.

Offshore Equipment Revenue Becomes a Highlight

From the overall financial report, ZPMC experienced revenue growth in 2024 but faced pressure on profitability.

In 2024, ZPMC achieved new highs in both revenue and net profit over the past three years, mainly benefiting from the release of orders in overseas markets and the demand for upgrading old port equipment domestically.

ZPMC's revenue structure is divided into port machinery business, offshore equipment business, and steel structure business.

From the revenue proportion data, the port machinery business remains ZPMC's core pillar, while the offshore equipment business has become a growth highlight. Since March 14, A-share offshore equipment has performed brilliantly, and ZPMC's stock price has shown strong performance.

During the reporting period, the port machinery business achieved 20.594 billion yuan in revenue, accounting for 59.77%, but revenue decreased by 3.03% year-on-year, marking the first negative growth in the last three years (2022-2024); among them, in the fourth quarter of last year, revenue declined by 12.74% year-on-year due to the delayed revenue recognition of the Saudi NEOM project.

The offshore equipment business generated 8.293 billion yuan in revenue, a substantial year-on-year increase of 52.92%, with its proportion rising to 24.07%, mainly benefiting from a 120% year-on-year increase in orders for offshore wind installation vessels and an increase in the proportion of deep-sea oil and gas equipment orders to 35%.

However, the overall gross margin for this business is only 9.02%, significantly lower than the 15.02% for port machinery, indicating that its technology conversion efficiency needs improvement, and the deep-sea strategy is still in a challenging process.

The steel structure business generated 3.342 billion yuan in revenue (accounting for 9.7%), with a gross margin plummeting to 1.45%, a dramatic decline of 83.76 percentage points compared to the previous year, becoming the main factor dragging down overall profitability.

Quarterly, ZPMC's performance in 2024 showed a clear trend of high performance in the first half and low performance in the second half.

In the first half of last year, the company's revenue surged by 28.49% year-on-year, but in the second half, especially in the fourth quarter, there was a sharp decline: single-quarter revenue was 9.094 billion yuan, a year-on-year decrease of 12.74%; net profit attributable to shareholders was 101 million yuan, a sharp drop of 49.76% year-on-year.

The financial report explains that the delay in revenue recognition for major projects such as the Saudi NEOM port in the fourth quarter is the main reason, but it also exposes the risk of dependence on overseas large projects.

In terms of cash flow, during the reporting period, although ZPMC's net cash flow from operating activities reached 5.276 billion yuan, it only increased by 1.77% year-on-year, and the company's accounts receivable issues cannot be ignored As of the end of 2024, ZPMC's accounts receivable balance reached 7.366 billion yuan, accounting for 1379.40% of the net profit attributable to shareholders (7.366/0.534), indicating that the company's collection cycle is too long.

Wall Street Insight conducted a vertical comparison with industry competitors, such as China International Marine Containers (CIMC), which had an accounts receivable balance of 29.86 billion yuan at the end of 2024, accounting for 1209% of its net profit of 2.47 billion yuan; Sany Heavy Industry had an accounts receivable balance of 68.72 billion yuan, accounting for 965% of its net profit of 7.12 billion yuan.

This indicates that although ZPMC's accounts receivable accounts for a high proportion of net profit attributable to shareholders, this is a characteristic of the heavy equipment manufacturing industry.

In addition, ZPMC's debt-to-asset ratio remains high at 78.64%, with interest-bearing liabilities of 28.546 billion yuan, of which short-term debt accounts for over 40%, indicating significant repayment pressure.

It is noteworthy that ZPMC is working hard to alleviate cash flow pressure through bill financing, with accounts receivable bills growing by 254.06% in 2024, far exceeding revenue growth.

Significant Increase in Deep Sea Technology Investment

Driven by deep sea technology policies, ZPMC's stock price rose from March 14 to March 25, peaking at 5.95 yuan, with a maximum increase of over 56%, and a rolling price-to-earnings ratio of 42 times, higher than the industry average of 36.92 times.

Wall Street Insight noted that ZPMC emphasized its deep sea layout in its 2024 performance report, including the world's first 3000-meter deep water engineering survey vessel and supporting equipment for underwater data centers, but the characteristic of its offshore engineering equipment business being "large but not strong" has not changed.

The report shows that the revenue scale of the offshore engineering equipment segment is close to 40% of that of port machinery, but its gross profit margin is only 60% of the latter, and with long contract cycles and slow payment collection, provisions for bad debts in accounts receivable have been listed as key audit matters.

It should be said that ZPMC is very willing to invest heavily in technology.

In 2024, ZPMC's R&D investment reached 1.502 billion yuan, a year-on-year increase of 14.55%, with the R&D ratio rising to 4.36%, reaching a five-year high.

According to authoritative data and industry practices, the average R&D investment intensity in China's heavy equipment manufacturing industry in 2024 is about 3.2%-3.8%, with high-end equipment manufacturing sub-sectors reaching 4%-5%.

ZPMC's R&D investment ratio last year was 4.36%, falling within the R&D investment ratio range of high-end equipment manufacturing, reflecting ZPMC's continuous high-intensity investment in green and intelligent transformation.

In 2024, the R&D investment intensity of leading international heavy equipment companies generally falls within the range of 2.6%-4.29%.

For example, global construction machinery giant Caterpillar's R&D investment reached 2.142 billion USD in 2024, accounting for 3.3% of its revenue; German heavy equipment manufacturer ThyssenKrupp's R&D intensity target for the 2023/2024 fiscal year is 3.0%; Siemens Gamesa's R&D intensity is 3%-4.2%, etc.

ZPMC's technological accumulation in automated terminals and offshore wind power continues to translate into orders, but its cost control capability has weakened: the gross profit margin decreased by 0.76 percentage points year-on-year to 12.76%, and although the proportion of three expenses decreased by 18.14% to 3.99%, the rigid growth of R&D expenses has squeezed profits Of course, such high-intensity R&D investment is likely to achieve higher technology conversion efficiency in the future. This is more worthy of respect and attention than many companies taking profits to buy bank wealth management products.

The management of ZPMC stated in the annual report that by 2025, it will focus on the deep-sea economy and digital transformation, promoting the intelligence of port machinery and the high-end development of marine engineering equipment.

This direction certainly aligns with national policy guidance, but intensified industry competition and fluctuations in raw material prices remain potential risks.

Dongxing Securities Co., Ltd. analysts pointed out that ZPMC needs to find a balance between technological innovation and cost optimization while accelerating accounts receivable turnover to alleviate cash flow pressure.

ZPMC's 2024 financial report reveals a dual dilemma of sluggish growth in traditional advantageous businesses and insufficient profitability in emerging fields.

Although the deep-sea strategy opens up imaginative space for the company, the pressure on short-term performance and the divergence from high valuations still need to be resolved through substantial technological breakthroughs and optimization of business models.

In the future, whether this company can seize opportunities in the global port automation wave and deep-sea resource development will be key to its valuation reconstruction, which also reflects the difficulties of traditional manufacturing enterprises in transformation