Zhejiang Dingli's 1Q26 revenue hit a record high; Goldman Sachs maintains Buy and raises target price

Overview

This report is Goldman Sachs' review of Zhejiang Dingli's 1Q26 results. The company posted record-high 1Q26 revenue, and net profit came in significantly above Goldman Sachs expectations; although U.S. tariffs, tariff-related costs, and FX losses weighed on gross margin and net margin, product mix improvement, partial price hikes, and strict expense control drove solid operating margin performance. Goldman Sachs maintains its Buy rating and raises its 12-month target price to Rmb71.0.

Core views

The core views include: first, overseas market demand remains strong, with growth across all regions and production lines operating at full capacity; second, the domestic market remains under short-term pressure, but the company is seeking incremental demand through new products, new application scenarios, AWP+, and robotic solutions; third, the company continues to demonstrate advantages in product differentiation, pricing power, vertical integration, and supply chain management even under a high-tariff environment; fourth, expense control improved significantly, with the 1Q26 operating expense ratio falling to 7%, below 15% in 1Q25 and the historical first-quarter average of 9%.

Analysis framework

Goldman Sachs compares actual 1Q26 results with its own forecasts, focusing on revenue, gross margin, operating expenses, FX impact, cash flow, and the balance sheet, and updates its 2026E-2028E EPS forecasts and valuation basis in conjunction with management's conference call guidance on regional demand, tariffs, capacity, expense ratio, and capex.

Methodology notes

• Valuation methodsEV/DACF and target price framework

  The 12-month target price is based on an 11.0x target multiple of average 2026E/2027E DACF.

  Goldman Sachs rolls the valuation benchmark from 2026E to the average of 2026E/2027E, using a target EV/DACF multiple of 11.0x, one standard deviation below the three-year average, to reflect the constraints that global trade uncertainty places on valuation upside.

• Earnings forecastEPS forecast revision

  Fine-tune 2026E-2028E EPS based on 1Q26 results, FX assumptions, and the overseas demand outlook.

  Goldman Sachs lowers 2026E EPS by 4% due to FX impact, while raising 2027E-2028E EPS by 3%-5% due to stronger-than-expected overseas markets and SG&A expense control.

• Factor analysisGS Factor Profile

  Compare stocks across growth, financial returns, valuation multiples, and composite factor dimensions.

  This framework uses Goldman Sachs forecast metrics to standardize and rank stocks within market and industry coverage, helping assess growth, returns, valuation, and overall attractiveness.

Asset mapping & comparison

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

• Zhejiang Dingli Co Ltd. (603338.SS)

  Covered company and core investment target

  Strengths

  Strong overseas demand, production lines at full capacity, product differentiation, improved expense control, and a net cash balance sheet.

  Weaknesses

  Domestic market demand remains weak, gross margin is pressured by U.S. tariffs and related costs, and FX losses weigh on net profit.

  Comparison

  Goldman Sachs believes the company demonstrates strong operating resilience within its China machinery coverage and, under a high-tariff environment, shows better product differentiation and cost competitiveness than domestic peers.

  Risks

  Weaker-than-expected global construction activity, intensified AWP competition, lower-than-expected penetration of boom products in the U.S., escalation of trade friction, and unexpected trade restrictions.

Key data

• 12-month target priceRmb71.00Raised from Rmb63.0 to Rmb71.0.
• Current priceRmb57.02Price disclosed in the report.
• Implied upside24.5%Calculated based on target price and current price.
• 1Q26 revenueRmb2.46bnUp 29% YoY, 13% above Goldman Sachs estimates, and a record high.
• 1Q26 net profitRmb453mnUp 6% YoY, 31% above Goldman Sachs estimates.
• 1Q26 net profit excluding FX impact~Rmb594mnUp 64% YoY, the highest first-quarter level on record.
• 1Q26 gross margin33.8%Down 6.8ppt YoY and up 5.2ppt QoQ.
• 1Q26 operating expense ratio7%Below 15% in 1Q25 and the historical first-quarter average of 9%.
• 1Q26 EBITRmb609mnUp 38% YoY, 23% above Goldman Sachs estimates.
• 1Q26 operating cash flow-Rmb186mnImproved from -Rmb472mn in 1Q25.
• Ending net cashRmb3.78bnAs of the end of 1Q26, versus Rmb3.85bn at the end of 4Q25.
• 2026E EPSRmb4.10New forecast; previous forecast was Rmb4.29.
• 2027E EPSRmb5.24New forecast; previous forecast was Rmb5.01.
• 2028E EPSRmb5.95New forecast; previous forecast was Rmb5.75.

Impact & implications

The report has a positive investment implication for Zhejiang Dingli: near-term results demonstrate that overseas demand and expense control are stronger than expected, and the target price increase reflects improved visibility on mid-term earnings; however, gross margin is still affected by tariffs and trade policy, and FX losses may also cause quarterly profit volatility. If double-digit overseas growth materializes, product mix continues to upgrade, and the expense ratio stays low, the case for share price upside will become more solid.

Risks

• Global construction activity is weaker than expected.
• Competition in the global aerial working platform market intensifies.
• Penetration of boom products in the U.S. market is slower than expected.
• Escalating China-U.S. trade tensions may lead to less favorable tariffs or costs for exports to the U.S.
• Unexpected trade restrictions could lead to adverse outcomes.
• FX losses may continue to weigh on quarterly profit.
• Short-term domestic market demand remains at a low level.

What to watch

• Whether overseas revenue achieves double-digit YoY growth in 2026.
• Whether U.S. tariffs and related costs stabilize, and whether the company's price increases and new-product pricing can offset the impact.
• Whether sequential gross margin recovery can continue.
• Whether the operating expense ratio can remain at around 10% or below.
• The progress of Phase VI new energy equipment capacity ramp-up and subsequent capex plans.
• Demand contribution from new application scenarios, after-sales services, AWP+, and robotic solutions in the domestic market.
• The impact of RMB exchange rate changes on net profit.