【行业研究报告】浙江鼎力-New AWP capacity expansion plan to further enhance global competitiveness

25Mar202425Mar2024CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateZhejiangDingli(603338CH)NewAWPcapacityexpansionplantofurtherenhanceglobalcompetitivenessZhejiangDingli(Dingli)announcedovertheweekendthatitplanstospendRMB1.7bntobuildanewproductionbasefor20kunitsofnewenergyaerialworkplatform(AWP).Weunderstandthattheentirecapacitywillbeforscissorslifts,giventherisingdemandforelectricandadvancedmodelsintheoverseas.Weestimatethenewcapacitywilladd30%capacityin2026-27E.Withnetcashof~RMB3bnbasedonourestimate,Dinglihassufficientinternalresourcestofinancethecapexwithouttheneedtogoforequityfinancing.Whiletherewillbenoearningscontributionbefore2026E,webelievetheexpansionplanwillhelpfurtherenhanceDingli’sglobalcompetitiveness.MaintainBUYwithunchangedtargetpriceofRMB70(18x2024EP/E,1SDbelowthehistoricalaverageof31x).Meanwhile,webelieveJiangsuHengli(601100CH,BUY),themajorsupplierofhydrauliccomponentsandmotors,willalsobenefitfromDingli’scapacityexpansionoverthemediumterm.Newcapacityandsalescontribution:Dingli’sboardofdirectorsapprovedon22Maraplantoconstructanewproductionbasefor20kunitsofnewenergyAWP.Dingliestimatesitwilltake36monthstocompletetheconstruction.Weseechancethatthecapacitywillcommenceearlierthanplanned,giventhepreviouscapacityexpansionexperience.Dingliestimatesthat,undernormalcircumstances,theannualsalescontributionfromthenewcapacitycouldreach~RMB2.5bn.Locationofthenewcapacity:DinglicurrentlyhasfiveproductionbasesinDeqing,Zhejiang.Thesiteareahasbeenfullyutilized.Therefore,DingliwillneedtoacquireapieceofnewlandinDeqingfortheplannednewcapacity.Capex:ThetotalbudgetisestimatedatRMB1.7bn,whichincludetheacquisitionofland,constructionworkandequipmentprocurement.Keyrisks:(1)FurtherintensifiedcompetitioninChina’sAWPmarket;(2)slowdownofoverseasdemand;and(3)sharpreboundofRMBrate.TargetPriceRMB70.00(PreviousTPRMB70.00)Up/Downside24.8%CurrentPriceRMB56.10ChinaCapitalGoodsWayneFUNG,CFA(852)39000826waynefung@cmbi.com.hkStockDataMktCap(RMBmn)28,403.4Avg3mthst/o(RMBmn)195.152wHigh/Low(RMB)61.65/43.58TotalIssuedShares(mn)506.3Source:FactSetShareholdingStructureXUShugen45.5%DeqingZhongdingEquityInvestmentManag11.6%Source:HKExSharePerformanceAbsoluteRelative1-mth-4.0%-5.6%3-mth13.7%7.4%6-mth8.1%14.0%Source:FactSet12-mthPricePerformanceSource:FactSetRelatedreports:CapitalGoods–2M24:Solidgrowthofforklifts;weaknesscontinuedfortowercranes&excavators–15Mar2024(link)CapitalGoodssector–StrongsalesofAWPs&forkliftsinJan;Towercranestheworst–29Feb2024(link)ChinaConstructionMachinery/HDT–2024Outlook:SlowdownofoverseasdemandalongwithlackofgrowthinChina;beselective–30Nov2023(link)ZhejiangDingli(603338CH),BUY)–3Q23earnings+53%YoY;Acleanbeatonasurprisingmarginexpansion–28Oct2023(link)EarningsSummary(YE31Dec)FY21AFY22AFY23EFY24EFY25ERevenue(RMBmn)4,9395,4456,2677,5088,646YoYgrowth(%)67.110.215.119.815.2Netprofit(RMBmn)884.51,257.21,693.01,963.12,229.2EPS(Reported)(RMB)1.822.483.343.884.40YoYgrowth(%)33.236.334.716.013.6ConsensusEPS(RMB)nana3.454.094.65P/E(x)43.819.616.814.512.7P/B(x)6.83.53.32.82.4Yield(%)0.41.01.21.41.6ROE(%)18.219.321.721.120.2Netgearing(%)(39.1)(28.4)(36.5)(44.7)(48.4)Source:Companydata,Bloomberg,CMBIGMestimates