In the post-1Q26 results call, Zoomlion explained that the lack of growth in China’s market was due to the continuous shift of focus to overseas. On the margin side, Zoomlion attributed the gross margin contraction in 1Q26 to FX, which is a short-term impact as FX gains (related to the previous sales) will be recognized in the upcoming finance income. On the other hand, certain largesize product sales in overseas (such as tower cranes and crawler cranes) were only affected by capacity constraint, and therefore delivery of such products in 2Q26 will help both revenue and margin. We believe the overall growth potential in overseas remains attractive. We fine-tuned our earnings forecast in 2026E/27E by -2%/-3%. Our TPs for Zoomlion A/H are slightly reduced to RMB11.8/HK$9.1 (from RMB12.0/HK$9.2), based on unchanged 2026E target P/E multiple of 18.6x for A-share and 30% discount for H-share. Maintain BUY.

1Q26 earnings highlight. Revenue in 1Q26 grew 7% YoY to RMB12.9bn, as the lack of growth in China offset the growth in overseas (+13% YoY to RMB7.4bn). Overseas revenue accounted for 57% of total revenue in 1Q26, slightly down from 61.5% in 4Q25. Blended gross margin contracted 1ppt YoY to 27.7%. Given the lack of disposal gain in 1Q26 (RMB558mn in 1Q25), EBIT dropped 29% YoY to RMB1bn. Net profit declined 37% YoY to RMB884mn, due to FX loss arising from the appreciation of RMB.

Capex plan in 2026: Zoomlion expects the capex will be similar to that in 2025. Key investment areas include capacity for mining machinery and agricultural machinery.

Key risks: (1) weaker-than-expected demand in China; (2) slowdown in overseas growth.