We invited SANYI’s management to share with investors the latest development this week. Key positives: （1） Strong demand across all segments with backlog already covering the capacity over coming 5-6 months; （2） Gross margin expanded in each segment on the back of new products and stringent cost control; （3） Fast introduction of intelligent and electric products. We fine-tuned our earnings forecast in 2021E/22E by -4%/+2%. Our TP is slightly revised up to HK$14.6, based on unchanged 23x 2022E P/E. Going forward, we see potential for SANYI to expand into the new energy segment. Maintain BUY.

Road header. The monthly order intake reaches 70-80 sets at present, much higher than the 45-50 units early last year. The visibility has increased to 3 months, versus only 1-2 months in the past. Intelligent models, which carries 40-45% gross margin, accounted for 50% of total new orders. The ratio is expected to further increase due to the trend of unmanned mining operation.

Combined coal mining equipment （CCMU）。 Backlog amounted to RMB1.5bn, with another contract of RMB300mn to be signed. This is equivalent to six-month backlog, offering good visibility in 1H22E.

Mining truck. SANYI delivered ~1,900 units of wide-body truck in 2021. In Dec, SANYI signed agreement with clients in Inner Mongolia to deliver 1,710 units of wide-body trucks this year （ASP: RMB0.95-1.1mn）。 SANYI targets to achieve sales of 800-1,000 units of electric wide-body truck this year, and to take the electric ratio to >50% in three to five years. Gross margin is expected to expand upon the launch of 2nd generation model.

Logistic equipment. For large-size port machinery, demand is strong due to the recovery in the overseas. Backlog amounted to RMB1.8bn （including RMB800mn in overseas）。 For small-size machinery, backlog amounted to RMB600mn （including RMB200mn in overseas）。 The growth is driven by reach stacker, heavy forklift and electric tractor.

Robotic. Among the three product lines, automated guided vehicles （AGV） and electric forklift are expected to grow faster than the system integration.

For internal sales, SANYI already helped SANY Group complete the upgrade of 27 smart factories （out of a total of 46）。 For external sales, SANYI recently won contracts from CRRC to deliver AGVs. SANYI has just established a distribution network which will help speed up the external sales volume. Current backlog amounted to RMB700-800mn, and potential contract （RMB900mn） is in the discussion stage.