Summary of Jiangsu Hengli Hydraulic Co.Ltd 3Q25 Earnings Call Company Overview - **Company**: Jiangsu Hengli Hydraulic Co.Ltd - **Industry**: China Industrials - **Stock Rating**: Overweight - **Price Target**: Rmb105.00 - **Current Price (as of Oct 27, 2025)**: Rmb93.96 - **Market Capitalization**: Rmb125,984 million - **Fiscal Year Ending**: December 2024 Key Financial Highlights - **3Q25 Revenue Growth**: Revenue increased by 25% YoY, driven by strong demand for excavator and non-excavator parts [8][9] - **Net Profit Growth**: Net profit rose by 31% YoY, attributed to reduced R&D costs and gains from financial assets despite higher selling costs and foreign exchange losses [8] - **Gross Profit Margin (GPM)**: Improved by 1 percentage point YoY due to a favorable product mix [8] - **Overseas Revenue Contribution**: Approximately 20% of total revenue, with Europe and North America contributing 7-8% and 5-6% respectively [8] Operational Updates - **Linear Actuator Revenue Guidance**: Revenue for F25 is guided down to Rmb100 million+, with expectations of Rmb200-300 million in F26 due to channel expansion [3] - **Losses in Linear Actuators and Mexico**: Reported a net loss of Rmb74 million for linear actuators and Rmb10 million for operations in Mexico in the first nine months of 2025 [3] - **New Plant Developments**: The Indonesian plant is ready for ramp-up with a design output of Rmb200 million, targeting local sales for small/midsized excavators [3][4] - **Brazilian Plant**: Currently in the site selection phase [4] Market Dynamics - **Global Demand Recovery**: The company is experiencing a recovery in global demand, particularly in Europe (marine, electric, and construction machinery), North America, and Southeast Asia [8] - **Future Growth Potential**: Long-term growth potential is high for humanoid robot parts, although no revenue target is set for F26 due to unfinalized specifications [8] Valuation and Risks - **Valuation Methodology**: Price target derived from applying a 35x P/E for core business and a 6x P/S on humanoid robot parts revenue, which is higher than the peer average due to expected stronger margins [9] - **Upside Risks**: Stronger-than-expected demand for excavators and pumps & valves, notable penetration into foreign brands' supply chains, and faster humanoid robot market share gain [11] - **Downside Risks**: Potential decline in excavator demand in China, failure to expand in non-excavator parts, and slower humanoid robot penetration [11] Conclusion - Jiangsu Hengli Hydraulic Co.Ltd is positioned for solid growth with a strong recovery in global demand and strategic expansions in production capabilities. The company is optimistic about future revenue growth, particularly in the humanoid robotics sector, while also managing risks associated with market fluctuations and operational challenges.

October 27, 2025 03:11 PM GMT M Update Jiangsu Hengli Hydraulic Co.Ltd | Asia Pacific 3Q25 Beats with Continued Sales Recovery Reaction to earnings Unchanged Modest upside Modest revision higher Impact to our thesis Financial results versus consensus Direction of next 12-month consensus EPS Source: Company data, Morgan Stanley Research 3Q25 results recap: Mgmt expects F25 sales and net profit growth of c.12%/16% YoY, in-line with 9M25 growth: Hengli expects improving sales growth for excavator cylinders wit ...

Summary of Hengli Hydraulic Conference Call Company Overview - **Company**: Hengli Hydraulic (601100.SS) - **Industry**: Hydraulic components and systems Key Points Revenue and Earnings Forecast - Ball screw and linear guide revenue is projected to be between Rmb120 million and Rmb130 million in 2025, significantly lower than the previous guidance of Rmb250 million [1] - The estimated net loss for the ball screw and linear guide business is expected to widen from approximately Rmb50 million in 2024 to between Rmb60 million and Rmb80 million in 2025 [1] - Despite challenges in the ball screw segment, Hengli's overall earnings growth is anticipated to accelerate to double digits year-over-year in 2025, up from 0% in 2024, driven by strong performance in the excavator component business [1] Quarterly Performance Expectations - A slight quarter-over-quarter revenue decline is expected in 3Q25, attributed to strong growth in excavator components and recovery in non-excavator products [2] - Gross profit margin (GPM) for 3Q25 is estimated to be around 42%-45% [2] - Projected earnings growth for 3Q25 is estimated at 32% year-over-year, with revenue growth of 25% and a 2.0 percentage point GPM expansion [2] Humanoid Robot Business - Management is optimistic about penetrating the supply chain of a leading US NEV maker for humanoid robot components, citing competitive advantages in R&D and cost structure [2] - Plans to build humanoid robot product capacity in France and the US are in progress [2] Chairman's Share Disposal - The Chairman announced the disposal of up to 40.2 million shares (3% of total shares) between September 1, 2025, and November 30, 2025 [3] - As of the latest update, one-third of the announced shares have been sold, with proceeds intended for investment in humanoid robot-related businesses overseas [3] Mexico Plant Performance - Revenue from the Mexico plant is projected to reach Rmb100 million in 2025, with expectations to barely break even [7] Valuation and Market Outlook - The target price for Hengli is set at Rmb105.0, based on a 43x 2025E P/E ratio, which aligns with its historical average [16] - Current market capitalization is Rmb125.152 billion (approximately US$17.597 billion) [5] Risks - Key risks include weaker demand for excavator and non-excavator components, reduced profitability from the ball screw and Mexico plants, and lower-than-expected GPM due to unfavorable product mix changes [17] Investment Recommendation - The recommendation for Hengli is a "Buy" rating, with an expected share price return of 12.5% and a total return of 13.4% [5]

Summary of Jiangsu Hengli Hydraulic Conference Call Company Overview - **Company**: Jiangsu Hengli Hydraulic - **Industry**: Heavy Machinery - **Market Cap**: Rmb130 billion / US$18.3 billion - **Shares Outstanding**: 1,305 million - **Current Share Price**: Rmb99.87 (as of 18 September 2025) - **12-Month Rating**: Buy - **12-Month Price Target**: Rmb115.00 (previously Rmb84.00) [7][20] Key Points Industry Dynamics - **Demand Recovery**: The domestic construction machinery market in China is expected to enter an upcycle in 2025, with domestic sales of construction machinery rising by 21.5% YoY in the first eight months of 2025 [10][14]. - **Excavator Sales**: Hengli's production scheduling for excavators was strong, driven by improving demand from domestic OEMs and increased overseas market share [3][10]. Financial Performance - **Earnings Growth**: EPS estimates for 2025-2027 have been raised by 8-11% due to stronger growth assumptions in the excavator cylinder and pump & valve segments [2][17]. - **Revenue Projections**: Revenue for 2025 is projected at Rmb10,266 million, with a CAGR of 21% expected from 2025-2027 [6][18]. - **Profitability Metrics**: EBIT margin is expected to improve from 26.9% in 2025 to 30% in 2027, with ROIC projected to rise from 32.6% to 37.7% during the same period [6][21]. Product Segments - **Excavator Business**: Revenue from excavators is expected to grow at a CAGR of 22% from 2025-2027, with significant contributions from the cylinder and pump & valve segments [27]. - **Screw Products**: The ball screw and roller screw segments are anticipated to become significant growth drivers, with the ball screw expected to contribute 11% of total revenue by 2029E [4][15]. Valuation Changes - **Valuation Methodology**: The valuation method has shifted from PE to SOTP (Sum of the Parts) to better reflect the potential of the screw businesses [19]. - **Price Target Adjustment**: The price target has been lifted to Rmb115.00, implying a 42x PE for 2026E, which is higher than the average of peers in the humanoid robot sector [20][21]. Risks and Considerations - **Geopolitical Risks**: There is uncertainty regarding construction machinery exports to the US and EU due to potential trade restrictions [10]. - **Market Competition**: Hengli is ranked as a top competitor in the industry, but there are concerns about the fundamentals of lower-ranked companies like Dingli [10][14]. Additional Insights - **Technological Advancements**: Hengli is focusing on technological strengths to capitalize on the humanoid robotics market, although this segment is still in early development [15][16]. - **Market Share Gains**: Continued share gains in the cylinder and pump & valve markets are expected, with potential breakthroughs in the screw businesses not fully priced into the current valuation [2][14]. Conclusion Jiangsu Hengli Hydraulic is positioned for strong growth in the heavy machinery sector, driven by recovering demand, robust financial performance, and strategic advancements in product offerings. The company's valuation reflects optimism about its future earnings potential, particularly in the excavator and screw product segments.

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Investment Rating - The investment rating for Hengli Hydraulic is "Buy" with a target price of Rmb85.0, indicating an expected share price return of 22.6% and an expected total return of 23.6% [4][13]. Core Insights - The commencement of operations at Hengli's Mexico plant is viewed positively, as it will help mitigate the impact of US reciprocal tariffs, despite the plant's revenue contribution being limited to Rmb200 million-300 million in 2025, which is only 2%-3% of the projected revenue [1][3]. - In May 2025, while the overall excavator shipment growth in China decreased to 2% YoY, Hengli's excavator cylinder production surged by 51% YoY, indicating strong demand and restocking from US customers [3]. - Management anticipates that Hengli's revenue growth in Q2 2025 could accelerate to double-digit YoY growth, up from 3% YoY in Q1 2025, driven by increased production guidance [3]. Summary by Sections Company Overview - Hengli hosted an opening ceremony for its Mexico plant on June 11, 2025, and plans to start production of excavator components for US clients [1]. Financial Projections - The revenue target for the Mexico plant is set at Rmb200 million-300 million for 2025, contributing minimally to the overall revenue forecast [1]. - The expected dividend yield is 1.0%, contributing to the total expected return of 23.6% [4]. Production and Market Trends - The production guidance for June 2025 is set at 55,000 units, which is 28% higher than the actual output of 34,200 units in June 2024 [3]. - The overall excavator shipment growth in China has slowed, but Hengli's production has significantly outperformed this trend, indicating a strong market position [3].

Investment Rating - The report maintains a Buy rating on Hengli Hydraulic with a target price of Rmb85.0, indicating an expected share price return of 26.1% and a total return of 27.2% [6][15]. Core Insights - Hengli Hydraulic aims for over 10% year-on-year growth in both revenue and earnings in 2025, primarily driven by a 20% increase in excavator component revenue despite flat non-excavator business [1]. - The Mexico plant is set to ramp up in June 2025, expected to contribute Rmb200m-300m to revenue in 2025, which would represent approximately 50% of Hengli's US revenue [4]. - The impact of US tariffs on demand has been limited, as major US customers can source Hengli's products from non-US plants [1]. Summary by Sections Excavator Business - Revenue from excavator pumps and valves is projected to grow by 30% year-on-year in 2025, while cylinder revenue is expected to increase by 10% year-on-year, driven by market share gains in China [2]. - Monthly production has been at full utilization from March to May 2025, but a decline is anticipated in June due to seasonal factors [2]. Non-Excavator Business - Revenue in the non-excavator segment is expected to remain flat in 2025, primarily due to weaker demand for Aerial Work Platforms (AWP), which accounted for about 10% of total revenue in 2024 [3]. - Non-excavator cylinders are projected to decline by a single digit year-on-year, while pump and valve revenues may still see a year-on-year increase [3]. Mexico Plant - The Mexico plant's revenue contribution is expected to double to Rmb600m-700m in 2026 and potentially reach Rmb3.0bn in the future [4]. Ball Screw and Linear Guide Business - Combined revenue from ball screws, linear guides, and electric actuators is anticipated to reach Rmb250m in 2025, with expectations to double to Rmb500m-600m in 2026, achieving gross and net profit margins of 30% and 10% respectively [5].