20211029-招银国际-浙江鼎力-603338.SH-3Q21_net_profit_+5.4__YoY__in_line_with_expectation_5页_1mb

Zhejiang Dingli - A (603338 CH) Summary

Core Content

Zhejiang Dingli - A (603338 CH) is a Chinese construction machinery company that reported satisfactory results in the third quarter of 2021. The company's net profit increased by 5.4% YoY to RMB223 million, which is considered resilient in the face of steel cost and freight rate pressures. This performance aligns with expectations, and the company is maintained in a "BUY" rating with a target price of RMB87.00.

Key Financial Highlights

• 3Q21 Revenue: RMB1.4 billion, up 46% YoY
• 3Q21 Net Profit: RMB223 million, up 5.4% YoY
• Gross Margin: Narrowed to 26.5%, down 9ppt YoY and 2.3ppt QoQ
• Operating Cash Inflow: RMB116 million, down 21% YoY
• 9M21 Revenue: RMB4 billion, up 62% YoY
• 9M21 Net Profit: RMB730 million, up 18% YoY

Market Outlook and Drivers

• Aerial Working Platforms (AWP): The AWP segment shows a promising outlook due to the replacement of labor in China, driven by rising wages and labor shortages.
• Far East Horizon (3360 HK): As a major customer, its ambitious fleet expansion is expected to boost Dingli's AWP sales in the coming years.
• US Export Duties: The US Department of Commerce finalized countervailing duties at 11.95% and anti-dumping duties at 17.78%. Dingli expects these to be manageable due to its strategy of offering less price-sensitive products.

Risks

• Price Competition: Increased competition from new entrants in the AWP market.
• Construction Activity Slowdown: Unexpected decline in construction activities in China.
• Steel and Freight Costs: Further increases in steel prices and freight rates could affect profitability.

Financial Summary (FY19A to FY23E)

Share Performance

• Market Cap (RMB mn): 35,319
• Avg 3 mths t/o (RMB mn): 489
• 52w High/Low (RMB): 140.3 / 53.9
• Total Issued Shares (mn): 485.5

Shareholding Structure

• XU Shugen: 47.5%
• Deqing Zhongding Equity: 12.1%
• Investment Management: N/A
• CCASS (Hong Kong): 11.7%
• National Social Security Fund: 1.6%
• Others: 27.1%

Price Performance

Key Assumptions and Revenue Breakdown

• Sales Volume (Units): No change across quarters for boom lifts, scissor lifts, and vertical lifts.
• ASP (RMB/unit): No change in ASP for all product types.
• Revenue Breakdown:
  • Boom Lifts: RMB1,275 (FY21E) to RMB1,939 (FY23E)
  • Scissor Lifts: RMB3,123 (FY21E) to RMB4,567 (FY23E)
  • Vertical Lifts: RMB119 (FY21E) to RMB144 (FY23E)
  • Total Revenue: RMB4,721 (FY21E) to RMB6,868 (FY23E)

Key Ratios

• Gross Margin: 39.9% (FY19A) to 27.9% (FY21E)
• EBITDA Margin: 29.9% (FY19A) to 22.7% (FY21E)
• EBIT Margin: 28.7% (FY19A) to 21.1% (FY21E)
• Net Profit Margin: 29.0% (FY19A) to 20.4% (FY21E)
• ROE: 23.9% (FY19A) to 23.1% (FY21E)
• Current Ratio: 2.3 (FY19A) to 1.8 (FY21E)
• Receivable Turnover Days: 170 (FY19A) to 125 (FY21E)
• Inventory Turnover Days: 104 (FY19A) to 130 (FY21E)
• Payable Turnover Days: 166 (FY19A) to 191 (FY21E)
• BVPS (RMB): 6.61 (FY19A) to 14.20 (FY23E)
• DPS (RMB): 0.25 (FY19A) to 0.58 (FY23E)

CMBIS 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

Analyst Certification

• The analyst certifies that the views expressed accurately reflect his/her personal views.
• No part of the analyst's compensation is directly or indirectly related to the specific views expressed.
• The analyst has not traded in the stock(s) covered in the report within 30 calendar days prior to the report's issue date.
• The analyst will not trade in the stock(s) covered in the report for 3 business days after the report's issue date.
• The analyst does not serve as an officer of any of the Hong Kong listed companies covered in this report.
• The analyst has no financial interests in the Hong Kong listed companies covered in this report.

Important Disclosures

• This report is not an offer or solicitation to buy or sell any security.
• The information is based on analyses and interpretations of publicly available and reliable data.
• CMBIS does not provide individually tailored investment advice.
• Past performance does not indicate future performance.
• The value and returns of investments are uncertain and may fluctuate.
• CMBIS recommends that investors should independently evaluate particular investments and strategies.
• Investors should consult with a professional financial advisor before making investment decisions.