CCB International believes that the increase in the profit margin of Zhonglian Heavy Industries (01157) is sustainable, and it is expected that there will be further increases this year.
The Zhitong Finance App learned that CCB International released a research report stating that it maintains the “outperforming the market” rating of Zoomlion Heavy Industries (01157), with a target price of HK$6.9. The bank said that the company's strong overseas performance in the first quarter of this year was enough to offset weak sales in China. Overseas sales increased 53% year over year to 5.7 billion yuan, accounting for 48% of total revenue. Furthermore, benefiting from the expansion of the overseas sales portfolio, the continuous increase in business scale and capacity utilization, and the company attached great importance to cost reduction, the gross margin of Zoomlion Heavy Industries increased by 2.3 percentage points in the first quarter. The bank believes that the increase in profit margins is sustainable, and expects further increases this year.
CCB International expects that by the end of 2024, Zoomlion Heavy Industries will reduce domestic inventories and release about RMB 5 billion in working capital. At the same time, the company plans to follow a more conservative risk management policy and not sacrifice its safety for market share. Sales are expected to fall year-on-year in 2024, but it is still manageable.