Sluggish overseas revenue growth in 3Q26 due to wars

　　中联重科(01157)

　　Zoomlion’s net profit in3Q26declined26%YoY to RMB859mn,due to weakrevenue growth(+5%YoY),lack of other gains and the increase in sellingexpenses.Based on our understanding,the sluggish revenue growth was dueto weak overseas growth(+1%YoY in3Q26)arising from the wars in theMiddle East and Ukraine.We trim our earnings forecasts in2026E/27E/28E by9%/5%/3%,due to lower sales volume and higher cost assumptions.Accordingly,our TPs for Zoomlion A/H are reduced to RMB10.7/HK$8.2,basedon an unchanged2026E target P/E multiple of18.6x for A-share and30%discount for H-share.We maintain our target P/E as we expect the potentialending of wars will help Zoomlion resume growth.Zoomlion will host investorcall at15:00(HKT)today.

　　3Q26earnings highlights:Revenue in3Q26grew5%YoY toRMB12.9bn(China+10%YoY;Overseas+1%YoY).Gross margincontracted0.2ppt YoY to27.8%.Given the lack of other gains in3Q26(~RMB388mn in3Q25)and a28%YoY increase in S&D expenses,EBITdropped32%YoY to RMB1bn.Net profit declined26%YoY toRMB859mn.

　　Valuation:Our A-share target P/E(18.6x unchanged)is based on the five-year average historical P/E of13.7x plus1SD.Our above-average targetmultiple intends to reflect Zoomlion’s emerging market expansion story.Our H-share TP is based on a30%discount to A-share.

　　Key risks:(1)weaker-than-expected demand in China;(2)slowdown ofoverseas growth due to regional conflicts;(3)input cost pressure.