Zhejiang Dingli (Dingli)’s net profit in 2023 grew 49% YoY to RMB1.87bn, in line with the pre-announced profit of RMB1.86bn in Jan. In 1Q24, the adjusted net profit (excluding fair value loss of RMB101mn) grew 27% YoY to RMB404mn, which is in line with our expectation. During the post results call, management revealed that sales in the US has accelerated since early Apr, with a full year sales target of 2k units of boom lifts. Besides, boom lifts sales in overseas is expected to exceed that in China in 2024E (47% in 2023), implying better gross margin. In addition, phase five production plant is in ramp up stage, with a monthly boom lift output of 150 units at present which will be gradually increased. We raise our 2024E/25E earnings forecast by 7%/9%, due to higher assumptions on volume, gross margin and finance income. Accordingly, we revise up our TP to RMB75, based on unchanged 18x 2024E P/E (1SD below the historical average of 31x). Dingli remains our key pick given the continuous breakthrough in overseas market.

4Q23 net profit +51% YoY to a record high. Revenue grew 23% YoY to RMB1.57bn in 4Q23. Gross margin expanded 4.1ppt YoY to 41%, driven by rising margin of boom lifts. Administrative expense ratio expanded 1ppt to 2.6%. Net profit surged 51% YoY to RMB574mn which is a record high. For the full year in 2023, revenue grew 16% YoY to RMB6.3bn (overseas/China mix: 64%/36%). Among the overseas sales, 75% came from the US and Europe. Net profit grew 49% YoY to RMB1.87bn. Proposed dividend implies 27% payout ratio (up from 20% in 2022).

Adjusted net profit +27% YoY in 1Q24: Revenue grew 11% YoY to RMB1.45bn. Dingli revealed that a portion of the overseas sales in 1Q24 will be recognized as revenue in 2Q24. Gross margin expanded 3.5ppt to 41.1% (largely stable QoQ). Dingli recognized RMB101mn of fair value loss due to the share price pullback of Horizon CD (9930 HK, BUY). Excluding this item, the adjusted net profit would be RMB404mn, up 27% YoY.

Progress of anti-dumping investigation in the EU. Dingli expects the results will be announced in Jun. In the meantime, Dingli has accelerated the sales to the EU in response to the rush orders. Europe accounts for ~37% of Dingli’s overseas sales, in which the EU accounts for half. We think the risk is manageable given Dingli’s experience in handling the investigation in the US.

Key risks: (1) Further intensified competition in China’s AWP market; (2) slowdown of overseas demand; and (3) higher-than-expected anti-dumping duties and countervailing duties in the US and EU.