Yamato: Upgraded the rating of Zhonglian Heavy Industries (01157) to “buy” and the target price rose slightly to HK$8.3

The Zhitong Finance App learned that Daiwa released a research report saying that based on quarterly improvements in profit margin expectations, the rating of Zoomlion Heavy Industries (01157) was raised from “outperforming the market” to “buy”, and the target price was slightly raised from HK$8.2 to HK$8.3. The bank pointed out that the company's stock price plummeted after announcing its interim results, which was probably hampered by the situation in the Middle East and exchange factors.

The bank pointed out that the company's management attributed the pressure on performance in the first half of the year to the appreciation of the RMB, rising freight and supply chain costs, and the decline in sales share in high-margin regions such as the Middle East and Central Asia. It also expects gross margin to improve quarterly from the third quarter to the fourth quarter.

The bank believes that the impact of related negative factors has been reflected in stock price performance. The above ratings were raised based on quarterly improvements in profit margin expectations, but the revenue forecast for this year and next two years was lowered by 2%; the main downside risk is that downstream demand falls short of expectations.