SANY Heavy (SANY)’s net profit in 1H25 grew 46% YoY to RMB5.2bn (2Q25: +38% YoY), which is a strong set of results with major machinery products (except concrete) saw strong growth. For the first time since 2017, SANY proposed interim dividend of RMB0.31/shr, implying a 50% pay-out ratio (similar to the full year in 2024). We maintain our positive stance on SANY due to the replacement-driven upcycle of excavators, as well as further improvement of non-road machinery. We revise up our 2025E-27E earnings forecast by 10- 12%, after incorporating high sales and lower expense ratios. Accordingly, we revise up our TP to RMB24 (from RMB22), based on an unchanged target P/E of 24x (equivalent to 0.5SD above the average of 20x since 2017). Our above- average multiple is to reflect the earnings upcycle. Reiterate BUY.

2Q25 results highlights. Revenue grew 11% YoY to RMB23.6bn. Gross margin slightly contracted 0.4ppts YoY to 28.2%, while S&D expense ratio fell 1.3ppts YoY to 6.7%, representing a net expansion in margin (change in accounting effect eliminated). Administrative expense ratio dropped 0.4ppts YoY to 2.6%, while R&D expense ratio dropped 1.5ppts YoY to 4.7% (a continuous YoY reduction trend since late 2022). Net profit grew 38% YoY to RMB2.75bn, driven by strong operating leverage.

Overseas revenue grew 12% in 1H25 (60% of total revenue). In terms of

region, Africa surged 41% YoY to RMB3.6bn (14% of overseas revenue); Asia Pacific (ex-China) grew 16% YoY to RMB11.4bn (44%); Europe grew 1% YoY to RMB6.1bn (23%); America also grew 1% YoY to RMB5.1bn (19%). Overseas gross margin was 31.2%, versus 22.1% in China.