20260429-招银国际-浙江鼎力-603338.SH-Sustainability_of_growth_remains_to_be_seen_5页_930kb

Summary of Zhejiang Dingli (603338 CH)

Core Content

Zhejiang Dingli, a Chinese capital goods company, reported strong performance in 1Q26 with a 30% year-over-year (YoY) revenue growth to RMB2.46bn and a 5.2% quarter-over-quarter (QoQ) increase in gross margin to 33.8%. Despite these results, the sustainability of growth is uncertain due to factors such as potential tariff impacts and the declining SG&A expense ratio, which may have set a low base for future performance.

Key Financial Highlights

• Revenue: 1Q26 reached RMB2.46bn, up 30% YoY. FY26E is forecasted at RMB10.20bn, with YoY growth expected to slow to 19%.
• Net Profit: 1Q26 increased by 6% YoY to RMB453mn. FY26E is forecasted at RMB2.118bn, with net profit growing at a slower pace.
• EBIT: 1Q26 grew by 38% YoY to RMB609mn, driven by cost control and efficiency improvements.
• Operating Cash Flow: Improved by 61% YoY to RMB186mn, indicating better liquidity and operational efficiency.

Earnings Forecast and Valuation

• Earnings forecasts for 2026 and 2027 have been revised upward by 3% and 6%, respectively, due to higher sales volume assumptions.
• The target price (TP) has been revised to RMB59 (from RMB48), based on a 14x 2026 P/E ratio, which is 0.5 standard deviation below the three-year average P/E.
• The current price is RMB57.02, with a 3.5% upside to the revised TP.
• The company's P/E ratio is projected to decrease over the next few years, from 17.7 in FY24A to 11.1 in FY28E.
• P/B ratio is also expected to decline from 2.9 in FY24A to 1.7 in FY28E.

Risks and Opportunities

• Upside Risks: Recovery of AWP demand and strong demand for new products.
• Downside Risks: Further intensified competition in the Chinese AWP market and additional tariffs, anti-dumping (AD), and countervailing duties (CVD).

US Tariff Impact

• The US has imposed an AD rate of 18.27% on Dingli's AWPs, effective from 16 Apr 2026, with a total effective rate of approximately 76% when combined with CVD and Section 301 tariffs.
• Despite the high tariff rates, Dingli is believed to have the experience to manage these effectively.

Shareholding and Stock Performance

• The company's major shareholders include XU Shugen (45.5%) and Deqing Zhongding Equity (10.8%).
• The stock has had a 12-month price performance of 15.8% in absolute terms and 9.3% relative to the market.

Financial Ratios

• ROE: Maintained at around 17% in FY26E and is expected to decline slightly to 16.7% in FY28E.
• Net Gearing: Increased from -33.7% in FY24A to -39.8% in FY28E, indicating a growing reliance on debt.
• Current Ratio: Expected to rise from 2.4 in FY25A to 2.8 in FY28E, suggesting improved liquidity.

Valuation Bands

• Figure 3 and 4 show the 12-month forward P/E and P/B bands, respectively, which are used to assess the company's valuation relative to its peers and the market.

Analyst Rating

• The analyst maintains a HOLD rating, as the growth trend is not yet proven to be sustainable.

Disclaimer

• This report is for informational purposes only and is not tailored to individual investors.
• Past performance does not guarantee future results.
• The report may contain inaccuracies or omissions and is not liable for any reliance on its content.
• CMBIGM is not a registered broker-dealer in the United States and is not subject to U.S. research regulations.