Haitian's new order increased by over 30% YoY in 3Q24, still a strong growth. Breakdown by geography, domestic new order rose by over 20% YoY, extremely strong in July but slowed in August and September, while overseas new order soared by over 50% YoY in 3Q. As we have been highlighting, the major investment theme of Haitian is overseas expansion. Haitian enters the second phase of global expansion to build new manufacturing capacity on top of the setup of distribution centres during phase one. Although the domestic new order may continue to retain weak growth rate going forward, the overseas demand recovers quickly with the US$ back to the interest rate cut cycle. We reiterate BUY rating in the volatile market, with unchanged TP HK$28.81 implying 24% upside.

Key Factors for Rating

Haitian Int'l is one of the few manufacturers that can gain global market share without policy support. Haitian has been exploring the overseas markets along with the downstream clients in Southeast Asia and Mexico. Haitian has successfully built up the sales distribution channels, showroom, and some assembly lines in overseas over the past fifteen years. Thanks to the overseas strategy and high overseas demand for its PIMM (plastics injection molding machine), the overseas portion represents 30-39% of sales in recent three years.

Different from the phase one expansion focusing on building up sales centres instead of manufacturing centres, phase two aims at expanding overseas manufacturing capacity. Haitian plans to build new manufacturing capacity in Malaysia, India, Serbia, and Mexico. Therefore, the operation, manufacturing, distribution and sales of overseas leg will become independent. Overseas manufacturing capacity and operation would significantly help gain global market share.

Global demand would recover with the US$ goes back to interest rate cut cycle, starting from this 3Q. Overseas new order jumped by 50% YoY in 3Q for Haitian, helping to cover the slowdown in domestic market. The total new order rose by over 30% YoY in 3Q24 for Haitian, one of the highest new order growth in industrial sector.

Key Risks for Rating

If the equity market rally will be stronger than expected, Haitian might underperform the industrial SoEs.

Valuation

At present, Haitian trades at 10.1x24E P/E, still attractive given the over 30% YoY new order growth and strong earnings growth. We reiterate BUY rating on Haitian Int'l with 24% upside to our TP HK$28.81.