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].