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浙江鼎力(603338) Dingli reported strong net profit growth of 36% YoY in 3Q22, driven by a surprising recovery of gross margin (+5.8ppt YoY) and FX gains that offset the decline of revenue (-14% YoY due to delay of sales recognition) and increased R&D expense. We see this as a set of high quality results. Going forward, we are confident that on-track construction of distribution channel, wide range of product offerings and reliable supply chain will enable Dingli to capture the strong demand for AWP in the overseas. We revise up our earnings forecast in 2022E/23E/24E by 7%/5%/4%, mainly due to higher margin assumptions and fx gains. We revise up our TP to RMB59.5 accordingly, based on 25x 2022E P/E (up from 23x previously) on the back of 25% earnings CAGR in 2022E-24E. Current share price implies only <18x 2022E P/E>, 1SD below the historical average of 32x.Reiterate BUY. 3Q22 results highlights. Revenue dropped 14% YoY to RMB1.2bn in 3Q22,due to delay of revenue recognition as sales can only be recognized after product shipment is completed by certain overseas subsidiaries. Gross margin expanded 5.8ppt YoY / 5.4ppt QoQ to 32.4%, driven by lower freight rate and steel price as well as high export contribution. R&D expense increased by 1.8x YoY (5% of revenue). Such increase is related to the progress of the research projects. Net finance income of RMB74mn was recognized (vs net expense of RMB8mn in 3Q21) largely due to the appreciation of dollar. Net profit grew 36% YoY to RMB302mn in 3Q22.Operating cash inflow grew 2.3x to RMB383mn in 3Q22. In 9M22, revenue/net profit grew 4%/20% YoY to RMB4.2bn/RMB876mn. Well prepared to capture the robust demand for AWP in overseas. We estimate overseas revenue currently accounts for >60% of total revenue.Among the overseas sales, US and Europe account for 75%. In Europe, Dingli has already been capable of offering >30 metres large-size scissor lift which was previously dominated by overseas players. For boom lift, Dingli is capable to offer electric, hybrid and engine products that satisfy different conditions.Regarding the supply chain, Dingli has set up warehouses in the overseas and secured components that enough to support production until mid-2023E. Risks: (1) Intensified competition in China AWP market; (2) rebound of freight rate and steel price.
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（以下内容从招银国际《3Q22 earnings +36% YoY better than expectation; Raise earnings and TP on margin recovery》研报附件原文摘录）浙江鼎力(603338) Dingli reported strong net profit growth of 36% YoY in 3Q22, driven by a surprising recovery of gross margin (+5.8ppt YoY) and FX gains that offset the decline of revenue (-14% YoY due to delay of sales recognition) and increased R&D expense. We see this as a set of high quality results. Going forward, we are confident that on-track construction of distribution channel, wide range of product offerings and reliable supply chain will enable Dingli to capture the strong demand for AWP in the overseas. We revise up our earnings forecast in 2022E/23E/24E by 7%/5%/4%, mainly due to higher margin assumptions and fx gains. We revise up our TP to RMB59.5 accordingly, based on 25x 2022E P/E (up from 23x previously) on the back of 25% earnings CAGR in 2022E-24E. Current share price implies only <18x 2022E P/E>, 1SD below the historical average of 32x.Reiterate BUY. 3Q22 results highlights. Revenue dropped 14% YoY to RMB1.2bn in 3Q22,due to delay of revenue recognition as sales can only be recognized after product shipment is completed by certain overseas subsidiaries. Gross margin expanded 5.8ppt YoY / 5.4ppt QoQ to 32.4%, driven by lower freight rate and steel price as well as high export contribution. R&D expense increased by 1.8x YoY (5% of revenue). Such increase is related to the progress of the research projects. Net finance income of RMB74mn was recognized (vs net expense of RMB8mn in 3Q21) largely due to the appreciation of dollar. Net profit grew 36% YoY to RMB302mn in 3Q22.Operating cash inflow grew 2.3x to RMB383mn in 3Q22. In 9M22, revenue/net profit grew 4%/20% YoY to RMB4.2bn/RMB876mn. Well prepared to capture the robust demand for AWP in overseas. We estimate overseas revenue currently accounts for >60% of total revenue.Among the overseas sales, US and Europe account for 75%. In Europe, Dingli has already been capable of offering >30 metres large-size scissor lift which was previously dominated by overseas players. For boom lift, Dingli is capable to offer electric, hybrid and engine products that satisfy different conditions.Regarding the supply chain, Dingli has set up warehouses in the overseas and secured components that enough to support production until mid-2023E. Risks: (1) Intensified competition in China AWP market; (2) rebound of freight rate and steel price.
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