Sany Heavy Industry's 2025 results were in line with expectations, and profitability continued to improve

Overview

This report is Nomura's earnings review of Sany Heavy Industry's 2025 annual results. Both revenue and net profit grew strongly in 2025 and were broadly in line with expectations, with profit growth significantly outpacing revenue growth, mainly benefiting from a recovery in market demand and the continued implementation of cost-reduction and efficiency-improvement measures. The report believes that the company's operating quality is solid and cash flow performance is strong, laying the foundation for long-term sustainable growth.

Core views

The core view is that Sany Heavy Industry's fundamentals remain positive, with clear improvements in profitability and cash flow quality. Globalization, electrification and intelligentization will continue to strengthen competitiveness. However, overseas revenue may be affected by geopolitical uncertainty, while depreciation from fixed-asset expansion, higher overseas tax rates and potential FX losses will weigh on earnings forecasts. Therefore, Nomura maintains a Buy rating while lowering the target price and the 2026F/2027F earnings forecasts.

Analysis framework

The report mainly uses earnings decomposition, earnings forecast adjustments, cash flow and operating quality assessment, business competitiveness analysis, and relative valuation methods. Key analytical focuses include revenue and net profit growth, net profit margin, operating cash flow, the impact of overseas expansion, future revenue and profit forecasts, and the target valuation multiple consistent with the historical P/E average.

Methodology notes

• Valuation methodstarget_p/e multiple

  24x target P/E

  Nomura uses a 24x target P/E multiple, which corresponds to the company's 10-year historical average P/E, and derives the target price of CNY28.93 based on 2026F EPS.

• earnings_forecastforecast revision

  earnings forecast adjustment

  Due to uncertainty in overseas revenue, expansion-related depreciation, overseas tax rates and FX pressure, the report lowers its 2026F/2027F revenue and net profit forecasts and introduces 2028F forecasts for the first time.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Sany Heavy Industry 600031.SS

  Covered company

  Strengths

  A leader in construction machinery, with a product portfolio covering concrete machinery, excavators, cranes, piling machinery and road machinery; profitability and operating cash flow improved significantly in 2025; overseas expansion, electrification and intelligentization strengthen long-term competitiveness.

  Weaknesses

  Overseas expansion may bring higher depreciation, tax rates and FX pressure; some earnings forecasts were lowered due to uncertainty.

  Comparison

  The report uses CSI 300 as the A-share benchmark and the company's 10-year historical average P/E as the reference for the target multiple.

  Risks

  Intensifying competition, R&D progress falling short of expectations, weak downstream demand, geopolitical risks, FX fluctuations and raw material price volatility.

Key data

• 2025 revenueCNY89.7bnUp 14.4% y/y, broadly in line with Nomura's expectations.
• 2025 net profitCNY8.41bnUp 41.2% y/y, faster than revenue growth.
• 2025 net profit margin9.5%Up 1.7 percentage points y/y.
• 2025 operating cash flowCNY19.98bnUp 34.8% y/y, reaching a record high.
• 2026F revenue forecastCNY102.96bnCut by 0.3% versus the prior forecast.
• 2027F revenue forecastCNY118.15bnCut by 0.9% versus the prior forecast.
• 2026F net profit forecastCNY11.08bnCut by 2.3% versus the prior forecast.
• 2027F net profit forecastCNY13.57bnCut by 4.4% versus the prior forecast.
• 2028F revenue/net profit forecastCNY131.94bn / CNY15.73bnThe report introduces 2028F forecasts for the first time.
• Target priceCNY28.93Cut from CNY29.90, implying 42.5% upside.

Impact & implications

For investors, the report signals that Sany Heavy Industry's earnings recovery and improvement in operating quality remain attractive, and the current target price still points to substantial upside. However, valuation realization depends on the continued delivery of overseas expansion, R&D progress, demand recovery and cost control. In the short term, overseas uncertainty as well as exchange-rate, tax-rate and depreciation factors may affect earnings elasticity and market expectations.

Risks

• Changes in the global and regional competitive landscape or intensifying competition.
• R&D capabilities or R&D progress weaker than expected.
• Downstream demand weaker than expected.
• Geopolitical risks affecting overseas revenue.
• FX fluctuations leading to potential exchange losses.
• Raw material price volatility affecting costs and margins.
• Higher-than-expected fixed-asset depreciation and overseas tax pressure from overseas expansion.

What to watch

• Whether 2026F and 2027F revenue growth can be delivered.
• Whether overseas market revenue is affected by geopolitical factors.
• Whether net profit margin can continue to improve and offset depreciation, tax and FX pressure.
• Whether operating cash flow can remain at a high-quality level.
• Whether electrification, intelligentization and R&D progress meet expectations.
• The trajectory of downstream construction machinery demand and raw material costs.