2Q25 profit grew 19% YoY but largely on FX gains

　　浙江鼎力(603338)

　　Zhejiang Dingli (Dingli) preannounced over the weekend the key financialfigures for 1H25. We calculate that revenue grew 1% YoY to RMB2.4bn in 2Q25,which we think is a resilient figure given the volatile tariff level during the quarter.Net profit in 2Q25 grew 19% YoY to RMB622mn, largely driven by FX gains(strong EUR and GBP) which made the results slightly better than ourexpectation. We slightly revise up our 2025E earnings forecast by 3% largely onhigher FX gains. Our TP is revised up from RMB44 to RMB48, to reflect theimproving progress on the Sino-US tariff talks. That said, we maintain ourcautious stance on Dingli as we think it will take time for the Company to adjustits strategy (i.e. high proportion of capacity in China serving the US market).Maintain HOLD.

　　1H25 key financials. Revenue grew 12% YoY to RMB4.3bn. Net profit grew27% YoY to RMB1.05bn, which accounted for 55% of our new full-year netprofit forecast.

　　Valuation. We revise up our TP from RMB44 to RMB48, based on 12.8x2025E P/E (up from 12x previously) which is derived from 0.5SD (1.0SDpreviously) below the three-year average P/E of 13.5x. Our narrowed targetdiscount is to reflect the improving progress on the Sino-US tariff talks.

　　Upside risks: (1) Substantial reduction of proposed tariffs 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) weakness of overseasdemand.