The Zhitong Finance App learned that CICC released a research report stating that it covered Hongxin Construction and Development (09930) for the first time and gave it a “outperforming industry” rating. The company's EPS is expected to be 0.41 yuan and 0.48 yuan, respectively, from 2024 to 2025, the CAGR is 26%, and the target price is HK$3. The bank believes that the market has overlooked the importance of the company's capital advantage (sufficient capital, light asset size) and strong cash flow management ability in the leasing model.

The main views of CICC are as follows:

Construction leases are trillion-dollar, and the concentration of high-altitude vehicles is outstanding.

The construction leasing operation market is over 900 billion yuan. With the increase in the penetration rate of the leasing model, the scale is expected to maintain a CAGR growth of 10% until '27, but the market pattern is scattered (CR3 is only 1.5% in 2021, far lower than the US CR3 34%). Among them, high-altitude vehicles have become pioneers in the development of the rental market due to their high unit price, short usage cycle, low threshold, and high operating requirements, with high concentration (CR3 reached 58% in '22).

Multiple factors drive the continuous increase in high-altitude vehicles, with prominent scale effects and concentrated acceleration.

As practical, efficient, and safe equipment, high-altitude vehicles are continuously replacing traditional scaffolding. The number of units owned reached 490,000 in 22 years, and the market size is 13.3 billion yuan. Under the expansion of application scenarios and market promotion, the scale of high-altitude vehicles is expected to maintain a CAGR of 16% and grow to 31 billion yuan in 27 years. Since 2023, leading enterprises have had prominent advantages in scale, and their operating efficiency is far higher than that of the industry, while small enterprises have basically stopped buying new cars or entrusting operations to others due to weakening rental prices, tight capital, and increased pressure to pay debts; while leading companies will continue to expand their scale and gain share at an accelerated pace with their capital and operational advantages.

Hongxin C&D - a leading and steady operator in the high-altitude vehicle sector.

Hongxin has strong advantages in the field of high-altitude vehicles: 1) Scale effect: the company managed 180,000 high-altitude vehicles at the end of 23, with 400+ network coverage, leading rental rate; 2) Financial advantage: with the support of majority shareholders, the company has sufficient bank credit, lower financing costs (4.2-4.3%), and has been awarded the credit rating of China's honest “AAA” entities; 3) Supply chain advantages: the company cooperated with many financial rental companies to accelerate the expansion of equipment operation scale (as of 3Q23, the company had more than 50,000 rental high-altitude vehicles); 4) Steady operation The company pursues assets and liabilities for a long time Match and control the quality of accounts receivable through a strict risk control system. Looking forward to the future, with its core advantages in the field of high-altitude vehicles, the company will continue to develop new volume, maintain a leading position, and gradually explore emerging categories and expand overseas markets.