ZHEJIANG DINGLI(SH:603338)2025-11-01 13:47Summary of Zhejiang Dingli Co Ltd. Conference Call Company Overview - Company: Zhejiang Dingli Co Ltd. (603338.SS) - Industry: Aerial Working Platforms (AWP) Key Takeaways 1. US Sales Impact: - US sales were affected by a disrupted delivery cadence due to a temporary suspension in production and shipment in 2Q25 caused by high US tariff rates. Price negotiations have begun, with potential for an average selling price (ASP) increase if tariffs remain high into the next year [1][6][10] 2. Sales Targets: - Management reiterated full-year sales targets for the US (steady year-over-year) and Europe (slight growth). US demand is currently viewed as healthy, while Europe shows overall softness with recovery in Germany and the UK [1][6][10] 3. Market Contribution: - Non-Europe/US sales have surpassed Europe, which was previously Dingli's second-largest export market after the US [1][6] 4. Profitability Metrics: - Gross Profit Margin (GPM) increased by 4.1 percentage points quarter-over-quarter in 3Q25, but declined by 1.5 percentage points year-over-year due to rising costs from US tariffs. Operating expenses were well-controlled, with SG&A expenses rising by 17% year-over-year [10][12] 5. Foreign Exchange Loss: - A foreign exchange loss of approximately RMB 70 million negatively impacted the Net Profit Margin (NPM) by around 3 percentage points. Excluding this impact, NPM was approximately 26% in 3Q25 [10][12] 6. Accounts Receivable: - Accounts receivable increased by 32% year-over-year, attributed to adjusted revenue recognition methods for US business and favorable credit terms in non-Europe/US markets [10][12] 7. Cash Flow: - Operating cash flow declined to RMB 355 million from RMB 590 million in 3Q24, primarily due to the consolidation of CMEC and increased working capital needs for US market inventory [10][12] 8. Regional Outlook: - North America: Management expects full-year sales of approximately USD 500 million for CMEC (flat year-over-year). Inventory levels are deemed sufficient, and pricing negotiations for next year's orders are underway [10][12] - Europe: Dingli maintains a high-end market position with the lowest anti-dumping/subsidy duty rates compared to peers. Slight growth in sales is expected for 2025 [10][12] Investment Thesis - Long-term Potential: Dingli is positioned well in the under-penetrated Chinese AWP market, driven by rising labor costs, a construction worker shortage, and increasing safety awareness. The company is focusing on higher ASP products and has a competitive edge in electrification technology [11][12] Risks 1. Weaker-than-expected global construction activities 2. Intensifying competition in the AWP market 3. Slower penetration of boom products in the US market 4. Escalating US-China trade tensions leading to unfavorable tariffs [14] Financial Projections - Market Cap: RMB 25.8 billion / USD 3.6 billion - Revenue Forecasts: - 2025: RMB 8.95 billion - 2026: RMB 10.81 billion - 2027: RMB 12.65 billion [15] Conclusion - The company is maintaining a "Buy" rating due to its resilience in a high-tariff environment and potential for growth in both domestic and international markets, particularly as trade uncertainties ease [1][12]