恒立液压:2Q Net profit +85%YoY;Significant margin expansion_股票频道

Hengli’snetprofitin1H20grew47%YoYtoRMB986mn,implyinganimpressivenetprofitgrowthof85%YoYin2Q.Grossmarginof44.5%in2Qisarecordhigh,suggestinghighutilizationrateandstrongpricingpower.Werevisedupourearningsforecastin2020E-22Eby5-8%(12-15%aboveconsensus),afterincorporatinghighergrossmarginassumptionandlowerexpenseratios.Afterrollingoverthevaluationbaseto2021E,weraisedourTPtoRMB82basedonunchangedmultipleof45xP/E.Webelievethefast-growingpumpandvalvesaleswillcontinuetolendsupporttothevaluation.MaintainBUY.nKeyhighlightson1H20results.Revenuegrew24%YoYtoRMB3.46bnandgrossmarginsignificantlyexpanded4.9pptYoYto41.9%.This,coupledwithlowerSG&Aratios,boostedthenetprofitgrowthof47%YoY.Operatingcashinflowin1H20increasedby19%YoYtoRMB944mn.In2Q20,netprofitsurged85%YoYtoRMB639mn,mainlydrivenby71%YoYincreaseinrevenueand4.6pptYoYgrossmarginexpansion(to44.5%).nSolidsalesgrowthin1H20.Salesvolumeofhydrauliccylinderforexcavatorgrew27%YoY330kunits.Thesegmentrevenuegrew16%YoYtoRMB1.4bn,aresultoflowerASPduetohigherdemandforsmall-sizeexcavators.HydraulicTechnology,themajorsubsidiarywithafocusonhydraulicpumpandvalve,reportedrevenuegrowthof86%YoY.Revenueofnon-standardizedhydrauliccylindersdropped9%YoYtoRMB577mn.nProductionvolumestayinghighinJul&Aug.Basedonourunderstanding,Hengli’smonthlyproductionvolumereached53kunitsinJulandisexpectedtoreach54kunitsinAug.Suchmonthlyvolumesuggestsstrongdownstreamdemand.Besides,productionvolumeofpumpsandvalvesareexpectedtostayhighin3Q.nKeyrisks:(1)Slowdownofconstructionactivities;(2)riskofoverseasexpansion;(3)increaseinrawmaterialscost.