CICC published a research report stating that due to effective cost control, it has raised SANY INT'L's (00631) profit forecasts for 2025/2026 by 6%/4% to RMB 23.83/27.18 billion. The company's current share price corresponds to 8.5x/7.4x P/E for 2025/2026. Considering the upward profit revision and valuation shift to 2026, the firm has raised its target price by 20% to HKD 8.50, corresponding to 9.1x P/E for 2026, with 24% upside potential. The Outperform rating is maintained.
The company announced its 1H25 results with revenue of RMB 12.237 billion, up 13.8% year-on-year, and net profit attributable to shareholders of RMB 1.294 billion, up 25.3% year-on-year. Performance exceeded expectations, mainly due to reduced losses in new businesses and effective cost control.
CICC's main views are as follows:
**Mining Equipment Demand Under Pressure, Emerging Businesses Growing Rapidly**
1H25 mining equipment revenue was RMB 4.637 billion, down 21.9% year-on-year, mainly due to weak coal prices affecting domestic and overseas equipment demand. Logistics equipment, oil & gas equipment, and emerging business revenues were RMB 3.680/1.325/2.594 billion respectively, up 12.1%/56.6%/276.2% year-on-year, with silicon energy and lithium energy business revenues increasing significantly.
1H25 comprehensive gross margin was 23.7%, down 0.7ppt year-on-year, mainly due to business structure changes.
**Cost Control Significantly Optimized, Profitability Improved Across All Segments**
1H25 company's selling and administrative expense ratios decreased by 0.5/2.3ppt year-on-year respectively, with the company significantly optimizing R&D input-output ratio. 1H25 company's net profit margin was 10.6%, up 1ppt year-on-year.
By segment, mining, logistics, oil & gas, and emerging business operating profit margins were 16.6%/20.1%/8.7%/2.2% respectively, up 1.4/2.8/13.0/39.1ppt year-on-year respectively.
**Rapid Development of Mining Truck Electrification and Automation, Significant Room for Overseas Rigid Truck Market Share Growth**
Declining coal prices drive subcontractors' cost reduction needs, significantly boosting electric truck procurement willingness. The electrification rate of domestic wide-body trucks was approximately 5-10% in 2024, and is expected to exceed 20% in 2025.
With improved attendance rates and efficiency, the commercial model for autonomous mining trucks is gradually proving viable. The company has invested substantial R&D resources in intelligent driving, possessing integrated supply capabilities for complete vehicles, wire-controlled chassis, and software.
Caterpillar and Komatsu hold over 80% market share in the overseas rigid truck market. The company is promoting electric wheel rigid trucks with domestic supply chains, reducing total lifecycle operating costs. Having entered the product promotion phase in recent years, the firm is optimistic about the company's continued market share growth in overseas rigid truck markets.
**Emerging Industries Significantly Reduce Losses, Promoting Comprehensive Mining New Energy Solutions**
1H25 company's solar power station revenue increased significantly year-on-year. The lithium energy business injected in 2024 operates under an asset-light model with relatively high profit margins.
Looking ahead, with rising global decarbonization demand, electrification needs in overseas mining and other sectors will increase. The company's solar, energy storage, and equipment businesses form comprehensive solutions.
**Risk Warnings:** Coal capital expenditure under pressure; intensified mining truck competition; trade policy fluctuations.