Jiangsu Hengli Hydraulic CO.(SH:601100) Zhao Yin Guo Ji·2024-08-28 08:23Investment Rating - The report maintains a target price of RMB 64.00 for Jiangsu Hengli, representing a 33% upside from the previous price of RMB 48.12 [1]. Core Views - Jiangsu Hengli's EBIT grew by 58% year-on-year to RMB 644 million in Q2 2024, driven by a 22% increase in revenue and a 6.3 percentage point expansion in gross profit margin [1]. - The net profit increased by only 5% to RMB 686 million, primarily due to a high base effect from Q2 2023, which included significant foreign exchange gains [1]. - The report highlights three positive trends: (1) Continuous revenue contribution from non-excavator components; (2) Deliveries of electric cylinders and ball screws (key components for robots) starting in July, leading to rapid production increases; (3) The hydraulic component production base in Mexico is expected to commence operations in December, with a designed annual output value of USD 4.5 billion [1]. Financial Summary - For the first half of 2024, non-excavator cylinder sales increased by 21.5% year-on-year to 139,000 units, driven by demand from tunnel boring machines, cranes, and aerial work platforms [1]. - Revenue from non-excavator cylinders grew approximately 20% to RMB 1.3 billion, while revenue from excavator cylinders decreased by 13.5% to RMB 1.1 billion [1]. - The report projects revenue growth for Jiangsu Hengli, with total revenue expected to reach RMB 10,033 million in 2024, representing an 11.7% year-on-year increase [8]. Key Ratios - The gross profit margin for Q2 2024 improved to 43.1%, up 6.3 percentage points year-on-year and 3 percentage points quarter-on-quarter [1]. - The report indicates a projected P/E ratio of 31 times for 2024, aligning with historical averages [1]. - The net profit margin is expected to stabilize, with adjusted net profit forecasted to reach RMB 2,757 million in 2024, reflecting a 10.3% year-on-year growth [8].