Summary of Jiangsu Hengli Hydraulic Co., Ltd (A) Conference Call Company Overview - **Company**: Jiangsu Hengli Hydraulic Co., Ltd - **Sector**: Industrials/Multi-Industry - **Description**: Leading hydraulics supplier in China, focusing on mobile machinery hydraulic components such as excavator hydraulic cylinders, pumps, and valves [doc id='12'][doc id='28']. Key Points Sales Growth and Financial Performance - **Sales Growth**: Expected to accelerate in 2026 with a projected growth rate of 16% YoY, up from 13% YoY in 2025E, driven by: 1. Continued demand growth from mid-to-large excavators 2. Robust demand from overseas markets, particularly Europe 3. Market share gains in overseas construction and agricultural machinery brands [doc id='1'][doc id='3']. - **Earnings Forecast**: 2026/27E earnings raised by 5%/7% due to higher revenue forecasts from traditional business [doc id='3']. - **Net Income Projections**: - 2026E: RMB 3,438 million - 2027E: RMB 3,897 million - EPS for 2026E: RMB 2.56, up from RMB 2.44 [doc id='4'][doc id='15']. Humanoid Robot Component Expansion - **New Business Segment**: Expected ramp-up in humanoid robot-related business starting from 2026, including linear actuators and dexterous hand actuators, with anticipated revenue contribution of RMB 200-300 million in 2026 [doc id='2']. - **Market Share Goals**: Targeting 20% market share in linear actuators and dexterous hand actuators by 2030, contributing earnings of RMB 2.2 billion [doc id='2']. Valuation and Price Objective - **Price Objective**: Raised to RMB 130 from RMB 111, based on SOTP valuation reflecting competitive edge in humanoid robot actuator manufacturing [doc id='18'][doc id='21']. - **Valuation Metrics**: - Hydraulic components: 30x P/E for 2026E net profit - Humanoid robot components: 50x P/E for 2030E net profit [doc id='19']. Risks and Opportunities - **Upside Risks**: 1. Better-than-expected excavator sales volume 2. Successful market share gain in pumps and valves 3. Expansion into new products like ball screws [doc id='22']. - **Downside Risks**: 1. Slowdown in excavator sales volume 2. Impact of China-US trade conflicts on overseas performance 3. Failure to penetrate medium and large pump and valve markets [doc id='22']. Financial Metrics - **Key Financial Estimates**: - 2026E Revenue: RMB 12,310 million - 2026E Gross Profit: RMB 5,435 million - 2026E Operating Profit: RMB 3,461 million [doc id='4'][doc id='11']. - **Cash Flow**: Expected free cash flow of RMB 2,168 million in 2026 [doc id='11']. Conclusion - **Investment Rating**: Reiterated Buy rating based on strong growth prospects in both traditional and new business segments, with a favorable outlook for the company's financial performance and market position [doc id='3'][doc id='13'].