4Q23 & 1Q24 earnings in line; Staying positive on overseas growth

Investment Rating - The report maintains a "BUY" rating for Zhejiang Dingli with a target price revised to RMB75, reflecting a 14.9% upside from the current price [3][6]. Core Insights - Zhejiang Dingli's net profit for 2023 increased by 49% year-on-year to RMB1.87 billion, aligning with earlier forecasts. The adjusted net profit for Q1 2024 rose by 27% year-on-year to RMB404 million, also meeting expectations. The company anticipates that overseas sales will surpass domestic sales in 2024, indicating improved gross margins [3][4]. - The company is experiencing accelerated sales growth in the US and expects to achieve a sales target of 2,000 boom lifts for the year. The ramp-up of production at the new phase five plant is underway, with current monthly output at 150 units [3][4]. Financial Performance - In Q4 2023, Zhejiang Dingli reported a record net profit of RMB574 million, a 51% increase year-on-year, with revenue growing by 23% to RMB1.57 billion. The gross margin expanded by 4.1 percentage points to 41% due to rising margins on boom lifts [3][4]. - For the full year 2023, total revenue reached RMB6.3 billion, with a 16% year-on-year growth. The revenue mix was 64% from overseas markets and 36% from China, with 75% of overseas sales coming from the US and Europe [3][4]. Earnings Forecast - The earnings forecast for 2024 and 2025 has been raised by 7% and 9% respectively, driven by higher volume assumptions, improved gross margins, and increased finance income. The target price reflects an unchanged P/E ratio of 18x for 2024, which is 1 standard deviation below the historical average of 31x [3][4][11]. Sales and Production Outlook - The company expects boom lift sales to reach 2,250 units in 2024, with a significant increase in production capacity anticipated from the new plant. The gross margin for boom lifts is projected to improve to 31% in 2024 [11][12]. - The report highlights that the company is responding to increased demand in the EU, which constitutes approximately 37% of its overseas sales, with half of that from the EU market [3][4]. Key Assumptions - The report outlines key assumptions for future sales volumes and revenue, indicating a growth trajectory for boom lifts, scissor lifts, and vertical lifts through 2026. Total revenue is expected to reach RMB10.41 billion by 2026, with a blended gross margin of 37.8% [11][12][16].