20250408-招银国际-浙江鼎力-603338.SH-Challenging_situation_with_pressure_from_bothend_demand_and_US_tariff__D_G_to_HOLD_6页_1mb

Zhejiang Dingli (603338 CH) Summary

Core Content

Zhejiang Dingli is a Chinese capital goods company that has been impacted by the recent US tariff policies on Chinese exports. The company is primarily focused on the manufacturing and sale of aerial work platforms (AWPs), including boom lifts, scissor lifts, and vertical lifts. The US has historically been the most important market for Dingli, accounting for nearly 30% of its total revenue in 2024E.

Main Points

• Impact of US Tariffs: The new US tariff on Chinese goods is proposed at 34%, which significantly exceeds the 19% reduction in anti-dumping (AD) duties approved by the US last year. Combined with countervailing duties (CVDs) of 11.95% and existing tariffs of 20%, the total tariff and duty burden is expected to exceed 78%.

• Earnings Forecast Revision: Due to the adverse impact of tariffs and reduced demand, the earnings forecast for 2024E, 2025E, and 2026E has been revised down by 3%, 12%, and 18% respectively. The revised 2025E earnings growth is expected to be only 5.2%, much lower than the previous forecast.

• Target Price Adjustment: The target price (TP) has been revised from RMB75 to RMB51, reflecting a 12x 2025E P/E multiple, which is 1 standard deviation below the three-year average P/E of 13.5x.

• Strategic Response: Dingli has been accelerating AWP shipments to the US in order to mitigate the impact of upcoming tariffs. The AWPs already in the US warehouse are expected to translate into actual sales and revenue in 2Q and 3Q25E.

• Upside and Downside Risks:

  • Upside: A reduction in proposed tariffs on China or stronger-than-expected demand in other countries.
  • Downside: Further increases in US tariffs, intensified competition in China's AWP market, or continued weakness in overseas demand.

Key Financial Metrics

Shareholding and Stock Data

• Market Cap (RMB mn): 25,061.9
• Average 3 months trading (RMB mn): 341.6
• 52-week High/Low (RMB): 72.98/45.52
• Total Issued Shares (mn): 506.3

Share Performance

Earnings and Revenue Breakdown by Product

• Boom Lifts: Revenue declined by 2.2% in 2024E, with a gross margin decrease of 2.5ppt and 3.0ppt in 2025E and 2026E respectively.
• Scissor Lifts: Revenue remained stable, with a slight decrease in gross margin.
• Vertical Lifts: Revenue remained stable, with a slight decrease in gross margin.
• Core Business Revenue: Revenue declined by 0.6% in 2024E, -7.2% in 2025E, and -14.4% in 2026E.
• Other Business: Revenue declined by 6.2% in 2024E, -12.1% in 2025E, and -16.7% in 2026E.

Gross Margin Trend

• Boom Lifts: Gross margin slightly declined to 33.0% in 2024E, 31.0% in 2025E, and 31.0% in 2026E.
• Scissor Lifts: Gross margin slightly declined to 39.0% in 2025E and 39.0% in 2026E.
• Vertical Lifts: Gross margin slightly declined to 43.0% in 2025E and 43.0% in 2026E.
• Core Business Gross Margin: Declined to 36.5% in 2025E and 36.4% in 2026E.
• Blended Gross Margin: Declined to 36.4% in 2026E.

Analyst Rating and Investment Outlook

• Analyst Rating: Downgraded from Buy to HOLD.
• Target Price: RMB51 (previously RMB75).
• Current Price: RMB49.50.
• Up/Downside: 3.0%.
• CMBIGM Ratings:
  • BUY: Potential return of over 15% over next 12 months.
  • HOLD: Potential return of +15% to -10% over next 12 months.
  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
  • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
  • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Key Risks and Opportunities

Upside Risks

• Substantial reduction in proposed tariffs on China.
• Stronger-than-expected demand in other countries, potentially offsetting US weakness.

Downside Risks

• Further increase in US tariffs.
• Intensified competition in China's AWP market.
• Continuous weakness in overseas demand.

Analyst Certification and Disclosures

• The analyst certifies that the views expressed in the report accurately reflect his/her personal views.
• The analyst has not traded in the stock covered in this report within 30 days prior to the report's release.
• The report is not tailored for individual investors and is not an offer to buy or sell any security.
• CMBIGM may have investment banking relationships with the companies mentioned and may have conflicts of interest.
• The report is for the use of intended recipients only and cannot be reproduced or distributed without consent.

Conclusion

Zhejiang Dingli faces a challenging situation due to the proposed US tariffs, which could significantly impact its earnings and growth. The company has taken steps to mitigate the risk by accelerating shipments to the US, but the overall outlook has been revised downward. The revised target price reflects the reduced earnings growth and the increased uncertainty in the market. Investors are advised to consider the potential risks and opportunities before making investment decisions.