Hengli’s net profit in 3Q25 surged 31% YoY to RMB658mn, which implies anacceleration of earnings growth (+3%/+18% YoY in 1Q25/2Q25). Theencouraging results were driven by continuous recovery of cylinder demand,which further enhances our above-consensus earnings forecast. While we haveleft our earnings forecast unchanged, we revise up our TP to RMB105 (fromRMB92) after rolling over our valuation base to 2026E (based on an unchangedP/E multiple of 41x, +1SD above the historical average). We continue to likeHengli as (1) the replacement-driven excavator upcycle is solid; (2) humanoidrobot components such as ball screws will serve as a structural growth driver.

Reiterate BUY.

Key highlights in 3Q25 results: Revenue in 3Q25 grew 25% YoY toRMB2.6bn. Gross margin expanded 1.1ppt YoY to 42.2%. Selling &distribution expense ratio slightly increased 0.2ppt YoY to 2.3%.

Administrative and R&D expense ratios were down 1.3ppt/2.1ppt to6.1%/7.4%. In 9M25, net profit increased 17% YoY to RMB2.1bn,accounting for 69% of our full-year forecast (run rate in 9M24: 65%).

Growth momentum to continue in Oct: We understand that Hengli hasscheduled a production volume of 55k units of hydraulic cylinders (forexcavators) in Oct, up >30% YoY. Among this, the planned production oflarge-/medium-/small-size cylinders is expected to grow 32%/27%/41%YoY. For non-standardized cylinders, the planned production in Oct isexpected to grow 35% YoY to 23k units, helped by the low base effect.

Risk factors: (1) Slowdown of demand for hydraulic components; (2)slower-than-expected new business development.