4Q25 earnings miss on gross margin and FX loss; But structural growth outlook still intact

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR <GO> OR http://www.cmbi.com.hk 1 MN 21 Apr 2026 CMB International Global Markets | Equity Research | Company Update Jiangsu Hengli (601100 CH) Jiangsu Hengli (601100 CH) - 4Q25 earnings miss on gross margin and FX loss; But structural growth outlook still intact 4Q25 earnings miss on gross margin and FX loss; But structural growth outlook still intact Hengli’s net profit in 4Q25 dropped 10% YoY to RMB647mn, which is 10%/5% below our/Bloomberg consensus estimates. The major deviation came from (1) a lower-than-expected gross margin (-6.11ppts YoY to 40.6%) due to higher sales of non-excavator component products; and (2) a RMB206mn net finance expense due mainly to fx loss (appreciation of RMB). That said, we are staying positive on Hengli as we expect continuous penetration into different downstream segments, as well as the structural growth outlook of humanoid robots. We slightly revise up our 2026E/27E earnings forecasts by 1%/4%, due to higher revenue and lower expense ratio assumptions. We slightly revise up our TP to RMB109 (from RMB105), based on 42x 2026E P/E (+1SD above the historical average unchanged, to reflect the machinery upcycle and humanoid robot components growth). We see any post-results share price pullback as buying opportunities.  Key highlights in 2025 results: Revenue in 2025 grew 17% YoY to RMB10.9bn (hydraulic cylinders: +10%; pump & valve: +21%; hydraulic systems: +30%; components: +30%). Blended gross margin contracted 1.2ppts YoY to 41.6%, due largely to a 2.9ppt YoY contraction of hydraulic cylinders margin. EBIT was +16% YoY due to lower SG&A and R&D expense ratio. Net profit only increased 9% YoY to RMB2.73bn due to a sharp reduction of net finance income as a result of FX loss. Operating cash inflow dropped 27% YoY to RMB1.8bn.  Risk factors: (1) Slowdown of demand for hydraulic components; (2) slower-than-expected new business development. Target Price RMB109.00 (Previous TP RMB105.00) Up/Downside 5.5% Current Price RMB103.32 China Capital Goods Wayne FUNG, CFA (852) 3900 0826 waynefung@cmbi.com.hk Stock Data Mkt Cap (RMB mn) 138,533.5 Avg 3 mths t/o (RMB mn) 1,149.5 52w High/Low (RMB) 123.74/66.70 Total Issued Shares (mn) 1340.8 Source: FactSet Shareholding Structure WANG's family 64.3% Source: SSE Share Performance Absolute Relative 1-mth 3.7% 0.1% 3-mth -10.1% -10.2% 6-mth 13.3% 8.7% Source: FactSet 12-mth Price Performance Source: FactSet Related reports: Capital Goods – Strong export of earth-moving machinery in Feb – 9 Mar 2026 (link) Capital Goods - Strong momentum of non-earth-moving machinery sales in Jan – 16 Feb 2026 (link) Jiangsu Hengli – 3Q25 earnings growth accelerated to 31% YoY – 28 Oct 2025 (link) Earnings Summary (YE 31 Dec) FY24A FY25A FY26E FY27E FY28E Revenue (RMB mn) 9,390 10,941 12,702 14,438 16,161 YoY growth (%) 4.5 16.5 16.