20230829-招银国际-恒立液压-601100.SH-2Q23_earnings_+24__Gross_margin_below_expectations_but_likely_rebounds_8页_1mb

Jiangsu Hengli (601100 CH) - Financial Report Summary

Performance Highlights

Jiangsu Hengli's net profit for 2Q23 increased 24% year-over-year to RMB653 million, primarily driven by FX gains that offset a 4 percentage point decline in gross margin YoY. Revenue grew 20% to RMB2 billion, but overall hydraulic components demand remains weak; gross margin recovery is expected post-Q2 due to reduced customer discounts. Full-year 2023E earnings are revised down 8% compared to estimates.

Key Growth Drivers

The company is developing ball screws, a key robotic component, with phase 1 production set to commence, targeting RMB400-500 million annual output. Expansion into the US market is anticipated through a Mexico production base, supporting earnings acceleration. Current TP set at RMB83, reflecting 42x 2023E P/E, up from previous RMB90.

Risks

Demand for hydraulic components may weaken further, and gross margin recovery is uncertain. Overall recommendation maintains "BUY" due to overseas growth potential, though TP is down 31.5% from current price.

Valuation

Current price: RMB63.10, P/E ratio 30.6x. Analysts forecast strong earnings growth driven by expansion, but margin pressures noted.