On Wednesday, an analyst from Citi adjusted the financial outlook for Zoomlion Heavy Industry Science & Tech (1157:HK) (OTC: ZLIOF), a company specializing in the manufacturing of construction machinery. The price target for Zoomlion's H-Shares was reduced to HK$6.50 from the previous HK$6.60. Despite the adjustment, the firm continues to endorse a Buy rating for the stock.
The revision follows the company's second-quarter 2024 results, which prompted Citi to revise its 2024/25 earnings forecasts downward by 5% and 7% respectively. The reduction in the price target by approximately 2% to HK$6.5 was primarily due to the weaker-than-expected revenue in the second quarter, particularly in the Chinese market, as reported by management.
Citi's outlook remains optimistic for Zoomlion's performance in the second half of 2024. The analyst highlighted that earnings growth is anticipated to accelerate to 36% in the latter half of the year, up from a 12% year-over-year increase in the first half. This projection is based on the low base effect from China's construction machinery downcycle in the second half of 2023.
Management at Zoomlion has indicated that they do not expect a decline in China revenue year-over-year for the second half of 2024. Additionally, they predict that overseas revenue could see a substantial increase, growing by 40%-50% year-over-year, which aligns with their previous guidance.
In the broader context of the industry, Citi has shifted its preference among machinery original equipment manufacturers (OEMs) to Sany (600031.SS), citing recent improvements in China's excavator exports and Sany's stronger operating cash flow as the basis for this change in stance.
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