Sany Heavy:First Look,FY12Results

What’s New:Sany Heavy Equipment International (631.HK) reported FY2012 results last night after the close. Sales declined -3.7% Y/Y slightly above the preliminary results released in January(-2.6% Y/Y). Reported EPS was Rmb 0.16; in-line with the pre-announcement. The company reported positive operating cash flow of Rmb 86.3 mil; an improvement from -Rmb 220.0 mil in 2011. The company also proposed a dividend of HKD 0.064 representing a dividend payout ratio of 32.2% (2011: 18.2%). The company also recognized an impairment loss of Rmb 11.6 bil vs. Rmb 6.1 bil in 2011.

Our Take:Wewere unsurprised by the lackluster results, which closely tracked the pre-announcement in January. Lower coal prices and declining coal mining investment were to blame for the decline year-over-year in sales. While we do not have full details, we estimate that thedecline in margins and EPS was a result of negative product mix (i.e. combined coal mining units).