Zhejiang Dingli’s (Dingli) EBIT in 1Q25 only slightly increased 2% YoY to RMB440mn, as the 30% YoY revenue growth was offset by higher SG&A expense which was likely a result of the consolidation of CMEC. The results were slightly weaker-than-expectations. Net profit grew 42% YoY to RMB429mn, but was largely helped by a 4.3x YoY increase in net finance income (FX gain based on our estimate) as well as a 93% YoY reduction on fair value loss (due to holdings in Horizon CD [9930 HK]). The net profit in 1Q25 accounted for 23% of our full-year net profit (15% below consensus). We maintain our view that the uncertain US tariff policy will (1) hurt the demand for AWPs in the US; and (2) put Dingli into a quandary given the high proportion of capacity in China serving the US market. We have left our earnings forecast unchanged. Maintain HOLD with TP of RMB44 (based on 12x 2025E P/E, derived from 1SD below the three-year average P/E of 13.5x to reflect earnings slowdown).

Dingli’s measures to mitigate tariff impact. The US formed the largest source of the company’s revenue in 2024 (30% of the total). Dingli’s current inventory of AWPs in the US (not subject to Trump’s newly proposed tariff) is enough to cover sales until Sep 2025. Going forward, Dingli will likely pass through part of the tariff by raising ASP. Besides, in the case of a high level of tariff for a prolonged period, Dingli will expand the production capacity in the US, despite a much higher production cost compared with China.

Upside risks: (1) Substantial reduction of proposed tariff on China; (2) stronger-than-expected demand in other countries that offsets the weakness in the US.

Downside risks: (1) Further increase in tariffs in the US; (2) further intensified competition in China’s AWP market; (3) continuous weakness of overseas demand.