We attended SANYI's 2023 post-results meeting together with >70 investors and analysts in the Company's production base in Zhuhai on 28 Mar. During the meeting, most of the questions were related to the solar power business. Given SANYI's determination to invest in solar power over the coming years, together with our lower estimates for the existing business, we revise down our 2024E/25E earnings forecast by 27%/30%. We forecast its net debt/equity ratio in 2024E/25E will further increase from the level of 21% as at end-2023. Putting solar aside, we expect overseas large mining trucks & telescopic handlers will help counter the potential down-cycle of coal mining machinery. Trading at 7x 2024E P/E, we believe the recent de-rating has largely reflected the risks.

Maintain BUY with a new TP of HK$8, based on 11x 2024E P/E, equivalent to the historical average (previously 19x 2023E P/E).

Investors' concerns on solar business. Most investors are concerned

that stepping into such a highly competitive industry with substantial capex may erode profit and exert pressure on the balance sheet. Management did not provide a precise capex guidance, but reiterated that it's necessary to invest in solar in order to achieve business diversification. Currently, SANYI has 5GW of solar cell & module capacity. SANYI targets to deliver RMB5bn revenue in 2024E, comprising ~RMB3.45bn from solar products, RMB150mn from equipment, and RMB1.4bn from solar farms and EPC.

Management believes part of the investment in solar farms could be recycled through disposal, which will help reduce the cash flow pressure.

Large mining truck a key driver in 2024E. Revenue from large mining

trucks surged 4.9x YoY to RMB1.1bn in 2023. SANYI targets to achieve RMB1.8bn of sales (VAT-included) in 2024E, driven mainly by overseas markets such as Russia and Indonesia. SANYI has already localized sales and production in Indonesia, and plans to achieve localisation in Russia in future.

Telescopic handler (伸缩臂叉车) another growth driver. Revenue from

telescopic handlers surged 2.6x YoY to RMB760mn in 2023. SANYI targets to achieve RMB1.5bn of sales (VAT-included) in 2024E (overseas sales: 90%), as a key growth driver in the logistics equipment segment. Since the telescopic handlers are manufactured at SANYI's India production base, they are not subject to tariffs imposed by the US or the EU.

Solid backlog for large-size port machinery. Large-size port machinery

revenue was RMB1.2bn in 2023, which is below our expectations as some customers postponed the delivery to 2024E. SANYI targets to achieve RMB1.3bn of overseas sales in 2024E (up from RMB750mn in 2023). The current backlog of RMB3.6bn (from customers such as PSA, Maersk) provides visibility to revenue in 2024E/25E.