External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

Jiangsu Hengli Highpressure Oil Cylinder / Equity Bottom-Up

<ul><li>Hengli’s net profit in 2Q23 grew 24% YoY to RMB653mn, with growth accelerated from 18% in 1Q23.</li><li>That said, we do not see this as high quality growth as it was largely driven by FX gain that offset a surprisingly decline in gross margin (-4 ppt YoY).</li><li>While the overall hydraulic components demand remained weak in Jul and Aug, we expect the gross margin to recover from 2Q as we understand that Hengli reduced the discount offered to customers. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Hengli’s net profit in 2Q23 grew 24% YoY to RMB653mn, with growth accelerated from 18% in 1Q23.That said, we do not see this as high quality growth as it was largely driven by FX gain that offset a surprisingly decline in gross margin (-4 ppt YoY).While the overall hydraulic components demand remained weak in Jul and Aug, we expect the gross margin to recover from 2Q as we understand that Hengli reduced the discount offered to customers. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Jiangsu Hengli (601100 CH) – 2Q23 Earnings +24%

Thematic (Sector/Industry)

<ul><li>What is new? The European Commission announced yesterday (13 Nov) that it will initiate an anti-dumping proceeding concerning imports of mobile access equipment (MAE, or AWP) from China.</li><li>While this looks negative to the Chinese AWP manufacturers at first glance, we think the estimated investigation time of 13-14 months will provide the Chinese manufacturers with time to take measures to mitigate the potential impact.</li><li>For instance, they can localize their AWP production overseas to avoid the potential duties. Besides, given that different tariffs may be applied, manufacturers with more experience in dealing with the investigation will have the chance to fight for lower tariffs.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

What is new? The European Commission announced yesterday (13 Nov) that it will initiate an anti-dumping proceeding concerning imports of mobile access equipment (MAE, or AWP) from China.While this looks negative to the Chinese AWP manufacturers at first glance, we think the estimated investigation time of 13-14 months will provide the Chinese manufacturers with time to take measures to mitigate the potential impact.For instance, they can localize their AWP production overseas to avoid the potential duties. Besides, given that different tariffs may be applied, manufacturers with more experience in dealing with the investigation will have the chance to fight for lower tariffs.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

<ul><li>Four companies reported their 3Q23 results last night. Weichai Power and Zoomlion reported better-than-expected results, while SANY Heavy and Jiangsu Hengli are below expectations.</li><li>All of them reported gross margin expansion but very different revenue growth trends due to different product mixes and geographic focuses.</li><li>All of them reported declines in net finance income due to the volatility of FX rates. Weichai Power and Zhejiang Dingli (reported over the weekend) remain our sector key picks.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Four companies reported their 3Q23 results last night. Weichai Power and Zoomlion reported better-than-expected results, while SANY Heavy and Jiangsu Hengli are below expectations.All of them reported gross margin expansion but very different revenue growth trends due to different product mixes and geographic focuses.All of them reported declines in net finance income due to the volatility of FX rates. Weichai Power and Zhejiang Dingli (reported over the weekend) remain our sector key picks.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Construction Machinery & HDT – 3Q23 Earnings Review

<ul><li>We upgrade Hengli to BUY from Hold for the first time since May 2021.</li><li>We are turning positive after visiting Hengli’s production base last week.</li><li>In the near term (coming months), we believe the growth (YoY) of excavator hydraulic cylinder production in Mar, after going through a declining trend since late 2021, suggests an early sign of turnaround of downstream demand. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We upgrade Hengli to BUY from Hold for the first time since May 2021.We are turning positive after visiting Hengli’s production base last week.In the near term (coming months), we believe the growth (YoY) of excavator hydraulic cylinder production in Mar, after going through a declining trend since late 2021, suggests an early sign of turnaround of downstream demand. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Jiangsu Hengli (601100 CH) – Positive takeaways from plant visit; U/G to BUY

<ul><li>Following a rally since early Feb, we believe the market has already priced in the upcoming recovery of machinery demand.</li><li>We see little upside potential in the near term, as (1) the recovery could be more seasonal (MoM) than structural (YoY), with sales of excavator (proxy for the sector) likely falling short of expectation in Mar; (2) We expect the strong credit growth will only translate into a moderate recovery of excavator demand this year (+10% YoY in our industry assumption).</li><li>Therefore, we are selective in our universe, and prefer only AWP (the only type of machinery that stands out by achieving 15% YoY growth in Jan). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Following a rally since early Feb, we believe the market has already priced in the upcoming recovery of machinery demand.We see little upside potential in the near term, as (1) the recovery could be more seasonal (MoM) than structural (YoY), with sales of excavator (proxy for the sector) likely falling short of expectation in Mar; (2) We expect the strong credit growth will only translate into a moderate recovery of excavator demand this year (+10% YoY in our industry assumption).Therefore, we are selective in our universe, and prefer only AWP (the only type of machinery that stands out by achieving 15% YoY growth in Jan). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Construction Machinery – Near-Term Recovery More Seasonal than Structural

China

Jiangsu Hengli Hydraulic Co Ltd develops, manufactures and sells high pressure tank, hydraulic components and hydraulic systems. The Company's main products include fuel tanks and non-standard cylinders for heavy equipment.

Jiangsu Hengli Highpressure Oil Cylinder (601100 CH)

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Jiangsu Hengli Highpressure Oil Cylinder (601100 CH)

Jiangsu Hengli (601100 CH) – 2Q23 Earnings +24%

Hengli’s net profit in 2Q23 grew 24% YoY to RMB653mn, with growth accelerated from 18% in 1Q23. That said, we do not see this as high quality...

CMB International

China Construction Machinery

The European Commission announced yesterday (13 Nov) that it will initiate an anti-dumping proceeding concerning imports of mobile access equipment...

CMB International

China Construction Machinery & HDT – 3Q23 Earnings Review

Four companies reported their 3Q23 results last night. Weichai Power and Zoomlion reported better-than-expected results, while SANY Heavy and...

CMB International

Jiangsu Hengli (601100 CH) – Positive takeaways from plant visit; U/G to BUY

We upgrade Hengli to BUY from Hold for the first time since May 2021. We are turning positive after visiting Hengli’s production base last week.

CMB International

China Construction Machinery – Near-Term Recovery More Seasonal than Structural

Following a rally since early Feb, we believe the market has already priced in the upcoming recovery of machinery demand.

CMB International

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