20201030-招银国际-浙江鼎力-603338.SH-Net_profit_in_3Q20_+16__YoY__Growth_trajectory_remains_solid_5页_1mb

Zhejiang Dingli - A (603338 CH) Summary

Core Content

Zhejiang Dingli - A (603338 CH) is a company under review by CMB International Securities. The report highlights its strong financial performance in the third quarter of 2020, with a 63% YoY revenue growth to RMB212 million. Despite this, the net profit increased by only 16% YoY to RMB212 million, primarily due to the ramp-up of new production capacity, increased R&D spending, and FX losses. However, the company's growth trajectory is still considered solid.

Main Points

• Revenue Growth:

  • 3Q20: 63% YoY increase to RMB212 million
  • 9M20: 40% YoY increase to RMB620 million
  • Full year estimates: 64.6% of full year forecast

• Profitability:

  • Net profit in 3Q20: RMB212 million (16% YoY)
  • Gross margin: 35.5% (down 4.1ppt YoY and 1.9ppt QoQ)
  • Operating cash flow: Strong, indicating good liquidity

• Financial Metrics:

  • EBITDA: RMB1,049 million (FY20E), with a projected 28.9% margin
  • Net profit margin: 26.5% (FY20E)
  • EPS: RMB1.98 (FY20E), RMB2.78 (FY21E), RMB3.35 (FY22E)
  • P/E: 49.9x (FY20E), 35.6x (FY21E), 29.5x (FY22E)
  • P/B: 11.8x (FY20E), 9.2x (FY21E), 7.2x (FY22E)

• Earnings Forecast:

  • Earnings forecast remains unchanged
  • Target Price: RMB117.00 (42x 2021E P/E multiple)
  • Current Price: RMB98.69
  • Up/Downside: +19% from current price

Key Information

Product Breakdown

• Boom lifts: Expected to grow significantly, with revenue increasing from RMB207 million (2018) to RMB495 million (2020E), and projected to reach RMB1,420 million (2022E)
• Scissor lifts: Steady growth, with revenue increasing from RMB1,283 million (2018) to RMB2,855 million (2020E), and projected to reach RMB4,243 million (2022E)
• Vertical lifts: Revenue has fluctuated, with a slight decrease in 2019 but expected to stabilize

Regional Breakdown

• The company's revenue is largely driven by domestic operations, with no significant disruption from the European lockdowns
• The report includes a chart showing revenue by region

Share Performance

• 1-month return: -0.8%
• 3-month return: 10.6%
• 6-month return: 105.7%

Shareholding Structure

• XU Shugen: 47.5%
• Deqing Zhongding Equity: 12.1%
• CCASS (Hong Kong): 8.4%
• National Social Security Fund: 1.6%
• Others: 30.4%

Risk Factors

• Price competition: Due to more new entrants in the AWP market
• Prolonged impact of COVID-19: In overseas markets
• Unexpected slowdown in construction activities: In China

Financial Summary

Income Statement (YE 31 Dec)

Cash Flow Summary (YE 31 Dec)

Balance Sheet (YE 31 Dec)

Key Ratios

Analyst Ratings

• BUY: Maintained, with a target price of RMB117.00
• HOLD: For stocks with potential return of +15% to -10%
• OUTPERFORM: For stocks expected to outperform the market
• MARKET-PERFORM: For stocks expected to perform in line with the market
• UNDERPERFORM: For stocks expected to underperform the market

Conclusion

Zhejiang Dingli - A (603338 CH) continues to show strong growth in revenue, driven by the increasing demand for aerial working platforms (AWP) in China. Despite the challenges posed by new capacity ramp-up, increased R&D spending, and FX losses, the company's financial performance remains robust. The analyst maintains a BUY rating with a target price of RMB117.00, indicating a positive outlook on the company's future performance. The company's core business is expected to grow steadily, with scissor lifts as the primary revenue driver. The potential improvement in gross margin is anticipated as production efficiency increases. However, risks such as price competition, pandemic impact, and construction slowdown remain.