2024 earnings way below expectations; outlook remains challenging

（以下内容从招银国际《2024 earnings way below expectations; outlook remains challenging》研报附件原文摘录）
浙江鼎力(603338)
Zhejiang Dingi’s (Dingi) net profit in 2024 came in at RMB1.63bn (-13% YoY),substantially falling short of our/Bloomberg consensus by 20%/21%. Thenegative surprise was due to: (1) advanced shipments of AWPs to the USwarehouses for customs clearance in 4Q24 to avoid upcoming tariff hikes, whichin turn resulted in early recognition of some costs; (2) the acquisition of CMECin mid-2024 that resulted in the consolidation of higher salary and warehouseexpenses. During the post-results call, Dingli revealed that the current AWPinventory (not subject to the recent increase in tariff) will be enough to cover thesales in the US until Sep 2025. We maintain our view that the unpredictable UStariff policy will (1) hurt the demand for AWPs in the US; and (2) put Dingli into aquandary given the high proportion of capacity in China serving the US market.We revise down our 2025E-26E earnings forecast by 13%, due to higher costassumptions. Maintain HOLD with new TP of RMB44 (previously RMB51), basedon an unchanged 12x 2025E P/E (derived from 1SD below the three-yearaverage P/E of 13.5x to reflect earnings slowdown).
4Q24 results highlights. Dingli’s gross profit dropped 28% to RMB515mnin 4Q24, due to a weak revenue growth (+6% YoY) and a 14.9ppt YoYcontraction of gross margin (to 30.9%). Net profit plummeted 71% YoY toRMB168mn, due to a higher administrative expense ratio (+2.3ppt YoY), anincrease in asset impairment and share of JV loss that offset the increase inother gains.
Measures to mitigate tariff impact. The US was the largest source ofrevenue in 2024 (30% of the total). Dingli’s current inventory of AWPs in theUS (not subject to Trump’s newly proposed tariff) is enough to cover salesuntil Sep 2025. Going forward, Dingli will likely pass through part of the tariffby raising ASP. Besides, in the case of a high level of tariff for a prolongedperiod, Dingli will expand the production capacity in the US, despite a muchhigher production cost compared with China.
Upside risks: (1) Substantial reduction of proposed tariff on China; (2)stronger-than-expected demand in other countries that offsets theweakness in the US.? Downside risks: (1) Further increase in tariffs in the US; (2) furtherintensified competition in China’s AWP market; (3) continuous weakness ofoverseas demand.