20220218-招银国际-浙江鼎力-603338.SH-Higher-than-expected_anti-dumping_duties_but_overhang_largely_removed_5页_1mb

Zhejiang Dingli (603338 CH) Company Update Summary

Core Content

Zhejiang Dingli, a Chinese capital goods company, has recently experienced an increase in anti-dumping duties (AD) from 17.78% to 31.54% in the U.S. This decision, pending final confirmation by the U.S. International Trade Commission (ITC), may impact the company's AWP (Articulated Work Platform) sales in the U.S. However, the company has a strategy to mitigate the impact by focusing on niche, differentiated products and vertical lifts, which are not subject to AD or CVD (Countervailing Duty).

The company has also announced capacity expansion through a share placement of RMB1.5 billion, which will be used to produce 4,000 units of large-size intelligent AWP. This includes 1,500 units of 36-50m electric boom lifts and 1,000 units of 33-36m electric scissor lifts. This move is expected to strengthen its competitive position in the long term.

Main Points

• Anti-Dumping Duty (AD) Increase:
  The U.S. Department of Commerce has imposed a higher-than-expected AD rate of 31.54%, which, when combined with the finalized CVD rate of 11.95%, results in a total duty rate of 43.49%.

  • The AD decision is subject to ITC confirmation.
  • The company will continue to engage with U.S. authorities to reduce these rates in the future.

• Impact on U.S. Sales:

  • U.S. market accounts for approximately 8–10% of total revenue.
  • The company will focus on niche, differentiated products to reduce price sensitivity.
  • Vertical lifts are not subject to AD or CVD and will be a key product for U.S. market expansion.

• Capacity Growth and Product Strategy:

  • The new capacity will support the production of high-end AWP products.
  • There are limited competitors capable of manufacturing these specialized products, giving Dingli a competitive edge.

• Earnings and Valuation Update:

  • Earnings forecasts for 2022/23E have been revised down by 5% and 3%, respectively.
  • The valuation base has been rolled over to 2022E, with a target price of RMB77, based on a 33x P/E ratio, which is at the historical average.
  • Current stock price is RMB61.05, with a potential upside of 26%.

Key Financial Highlights

Key Risks

• Price competition in the Chinese AWP market
• Unexpected slowdown in construction activities in China
• Further increase in freight rates

Shareholding and Stock Data

Share Performance

Analyst Rating and Target Price

• Rating: BUY (Maintain)
• Target Price: RMB77.00
• Previous TP: RMB87.00
• Up/Downside: 26%

Financial Summary (Selected)

• Revenue Growth: Expected to grow steadily, with a 21.0% YoY growth in FY23E.
• Gross Margin: The blended gross margin is projected to remain around 27.5–28.0%.
• EBITDA Margin: Expected to rise from 21.7% in FY21E to 24.3% in FY23E.
• Net Profit Margin: Expected to remain stable around 20.5–20.7%.

Key Ratios

Conclusion

Zhejiang Dingli is well-positioned to adapt to the increased U.S. AD and CVD by leveraging its differentiation strategy and vertical lift offerings. The company's capacity expansion and focus on high-end products are expected to bolster its long-term competitive position. Despite the challenges, the company maintains a BUY rating with a revised target price of RMB77. The financials show a steady growth trajectory, with strong profitability and a healthy balance sheet. Investors should be aware of the potential risks and consider consulting a financial advisor before making investment decisions.