Zhejiang Dingli Machinery (.SS)_ Reduction of Double Duties But Likely Negated by Possible Trump 2.0 Tariff Risk

Summary of Zhejiang Dingli Machinery (603338.SS) Conference Call Company Overview - Company: Zhejiang Dingli Machinery (603338.SS) - Market Cap: RMB 28,968 million (approximately USD 4,077 million) [3] Key Industry Insights - Industry: Construction Machinery - Revenue Distribution: Estimated revenue split by region for the current year is approximately 35-40% from the US, 20-25% from the EU, 10-15% from Asia, and 25-30% from China [4] Core Points and Arguments - Tariff Impact: The US Department of Commerce announced a reduction in double duties (anti-dumping and countervailing) by 19% for Dingli's US business, decreasing from 43% to 24%. The EU also reduced its anti-dumping duty by approximately 7%, from 31.3% to 23.6% [2] - Political Risk: The election of Donald Trump as the 47th US President is expected to increase US-China trade tariff risks to 60% from the current 25% for Chinese production. Despite this, Dingli plans to maintain 100% of its production in China for aerial working platforms (AWP) [2] - Investment Rating: Citi maintains a "Sell" rating for Dingli, citing that the potential incremental 35% tariff in the US would likely negate the benefits from the reduction of double duties in both the US and EU [2][5] - Target Price: The target price is set at RMB 35, which is based on a valuation of approximately 9-10x the expected reported EPS for 2024, reflecting a downcycle in the industry [6] Financial Projections - Expected Share Price Return: -38.8% - Expected Dividend Yield: 1.8% - Expected Total Return: -37.0% [3] Risks and Opportunities - Upside Risks: 1. Easing domestic competition could allow Dingli to regain market share in AWP [7] 2. Faster-than-expected production capacity expansion, particularly in the boom lifts segment [7] 3. Stronger-than-expected growth in overseas markets [7] 4. A downtrend in metal commodity costs could benefit Dingli [7] Conclusion - The conference call highlighted significant challenges for Zhejiang Dingli Machinery, particularly regarding tariff risks and market conditions. The reduction in duties may provide some relief, but the potential for increased tariffs under the new US administration poses a substantial risk to Dingli's profitability and market position. The overall sentiment remains cautious, with a recommendation to "Sell" based on the current outlook.