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.