Report Interpretation

Overview

This company-results update argues that Sany's revenue momentum is strengthening through a domestic construction-machinery recovery and accelerating overseas expansion. Nomura maintains Buy, while lowering its near-term earnings forecast and target price because FX losses materially increased finance costs.

Core views

Sany reported 1H26 revenue of CNY53.51bn, up 19.49% year on year, and net profit of CNY5.69bn, up 9.09%. Revenue exceeded Nomura's forecast, which the institution attributes to domestic demand bottoming out and stronger overseas demand in both volume and quality. In 2Q26, revenue grew 24.39% year on year to CNY29.36bn and net profit rose 16.92% to CNY3.21bn. Gross margin improved 0.34 percentage points year on year to 27.78% in 1H26 and reached 28.03% in 2Q26, up 0.06 percentage points year on year and 0.55 percentage points quarter on quarter. The combined SG&A and R&D expense ratio fell 0.84 percentage points to 13.34%, indicating better cost control. The earnings miss was concentrated in finance costs rather than core operating performance. Net margin declined 1.13 percentage points to 10.74%, as CNY appreciation increased FX losses and finance costs; 1H26 finance expenses were CNY1.65bn, up 292.58% year on year. Nomura regards the gross-margin outcome as in line with expectations and notes that SG&A and R&D control was materially better than expected, but the higher FX burden more than offset these positives for near-term profit. Nomura sees Sany's product competitiveness and global market position as supporting growth. Excavating-machinery revenue rose 21.77% to CNY21.31bn, with Sany remaining No. 1 in China and gaining global share. Concrete-machinery revenue increased 21.25% to CNY9.02bn, retaining its global No. 1 brand position, while hoisting-machinery revenue grew 8.22% to CNY8.45bn; small and medium-sized crawler cranes maintained the largest market share in China. Overseas revenue rose 21.82% in 1H26, faster than domestic growth, with Africa up 47.66% and the Americas up 24.70%. The report links this momentum to buoyant mining and infrastructure demand and continuing global share gains. Reflecting the revenue strength and construction-machinery upcycle, Nomura raises 2026F/2027F/2028F revenue by 0.6%/0.8%/0.8% to CNY103.59bn/CNY119.09bn/CNY132.99bn. However, it reduces 2026F net profit by 5.4% to CNY10.49bn after lowering SG&A and R&D ratio assumptions but sharply increasing its finance-expense assumption. It expects stronger FX-risk management to marginally ease the FX drag in 2027-28; combined with revenue growth and tighter expenses, this leads to 2027F and 2028F net-profit upgrades of 11.4% and 13.0% to CNY13.77bn and CNY16.20bn. For valuation, Nomura lowers its target P/E from 24x to 23x, still broadly in line with Sany's 10-year historical P/E average. Applying 23x to 2026F EPS of CNY1.14, revised from CNY1.15, produces a target price of CNY26.23, cut from CNY28.93. Nomura maintains Buy and states that the revised target implies 31.5% upside.

Analysis framework

Nomura first compares 1H26 and 2Q26 operating results with its forecasts, separating revenue, margins, operating expenses and finance costs. It then assesses demand recovery, product-category performance and overseas regional growth before revising revenue and earnings forecasts. The target price is derived by applying a target P/E multiple to 2026F EPS and comparing that multiple with Sany's historical valuation average.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Target P/E valuation

  Nomura applies a 23x target P/E multiple to 2026F EPS of CNY1.14 to calculate the CNY26.23 target price, using the company's 10-year historical P/E average as a reference point.

• Industry AnalysisVolume-price decomposition

  Revenue growth assessed through domestic and overseas demand, volume and product-category performance

  The report explains revenue outperformance through improving domestic demand and stronger overseas demand in volume and quality, supported by growth across key machinery categories.

Asset mapping & comparison

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

• Sany Heavy Industry (600031.SH)

  Primary covered company; revenue momentum is supported by domestic demand recovery, overseas expansion and share gains, while FX losses pressure near-term earnings.

  Strengths

  Strong positions in excavating, concrete and hoisting machinery; accelerating overseas revenue growth; improved SG&A and R&D cost control.

  Weaknesses

  FX losses and higher finance expenses reduced near-term profit conversion.

  Comparison

  Sany remains No. 1 in China in excavating machinery and retains the global No. 1 brand position in concrete machinery.

  Risks

  Competitive changes, weaker R&D capability or downstream demand, geopolitical risks, exchange-rate fluctuations and raw-material price volatility.

Key data

• 1H26 revenueCNY53.51bn+19.49% year on year; above Nomura's forecast.
• 1H26 net profitCNY5.69bn+9.09% year on year; slightly below forecast because of FX-related losses.
• 1H26 gross margin27.78%+0.34 percentage points year on year.
• 1H26 finance expensesCNY1.65bn+292.58% year on year, driven by higher FX losses and finance costs.
• 1H26 overseas revenue growth21.82%Outpaced domestic growth; Africa grew 47.66% and the Americas 24.70%.
• 2026F revenueCNY103.59bnRaised 0.6% from the prior estimate.
• 2026F net profitCNY10.49bnCut 5.4% from the prior estimate.
• 2027F/2028F net profitCNY13.77bn / CNY16.20bnRaised 11.4% / 13.0% from prior estimates.
• Target valuation23x 2026F P/EReduced from 24x; broadly in line with the 10-year historical average.

Impact & implications

The report considers the 1H26 revenue beat evidence that Sany is benefiting from an industry upcycle, recovering domestic demand and faster global expansion. Near-term FX costs lower 2026 earnings expectations, but Nomura expects easing FX pressure, continued growth and expense discipline to support stronger earnings improvement in 2027-28.

Risks

• Changes in the global or regional competitive landscape could impede target-price achievement.
• R&D capability could be weaker than expected.
• Downstream demand could be weaker than expected.
• Geopolitical risks could affect operations or demand.
• Exchange-rate fluctuations could increase FX-related costs.
• Raw-material price volatility could pressure profitability.