25 Aug 2026 CMB International Global Markets | Equity Research | Company Update

Jiangsu Hengli (601100 CH) Net profit -3% YoY in 2Q26 but largely due to FX loss; strong

Jiangsu Hengli (601100 CH)

Net profit -3% YoY in 2Q26 but largely due to revenuegrowthandEBIT FX loss; strong revenue growth and EBIT

Hengli’s net profit was flat YoY at RMB1.4bn in 1H26. This implies 2Q26 net profit of RMB784mn (slightly down 3% YoY), which is in line with our expectation. The lack of earnings growth in 2Q26, despite strong growth of revenue/EBIT of 32%/22% YoY, was largely due to FX loss (RMB appreciation). We maintain our positive stance on Hengli with unchanged TP of RMB125 (based on 48x 2026E P/E, 1.5SD above the historical average to reflect both the upcycle of hydraulic business and the huge growth potential of precision business). Hengli remains a key pick in our universe. Maintain BUY.

 Key highlights in 2Q26 results: Revenue in 2Q26 grew 32% YoY to RMB3.6bn. Blended gross margin contracted 4.1ppts YoY (due to high base) but expanded 1.3ppts QoQ to 39.9%. EBIT grew 22% YoY, as R&D expenses dropped 15% YoY which offset the increase in S&D expenses. Net profit was down 3% YoY at RMB784mn, as the FX loss was recognized (vs gain in 2Q25). Operating cash inflow increased 30% YoY to RMB736mn.

 Strong growth of hydraulic cylinders for excavators in 1H26 driven by industry upcycle. Sales volume surged 32% YoY to 408k units. We estimate that Hengli achieved a market share of 67% in 1H26, based on domestic sales and exports from China.

 Risk factors: (1) Slowdown of demand for hydraulic components; (2)

slower-than-expected new business development.

Earnings Summary

(YE 31 Dec) FY24A FY25A FY26E FY27E FY28E Revenue (RMB mn) 9,390 10,941 13,144 15,324 17,675

YoY growth (%) 4.5 16.5 20.1 16.6 15.3 Adjusted net profit (RMB mn) 2,508.7 2,734.0 3,491.4 4,194.0 4,883.0 EPS (Reported) (RMB) 1.87 2.04 2.60 3.13 3.64

YoY growth (%) 0.4 9.0 27.7 20.1 16.3 Consensus EPS (RMB) na na 2.56 3.15 3.75 P/E (x) 56.2 51.5 40.4 33.6 28.9 P/B (x) 8.9 8.2 7.2 6.3 5.6 Yield (%) 0.7 0.8 1.1 1.3 1.5 Net gearing (%) (49.8) (51.1) (45.4) (51.2) (52.0) Source: Company data, Bloomberg, CMBIGM estimates

Target Price RMB125.00 Up/Downside 18.9% Current Price RMB105.11

China Capital Goods Wayne FUNG, CFA

(852) 3900 0826 waynefung@cmbi.com.hk

Stock Data

Mkt Cap (RMB mn) 140,933.6 Avg 3 mths t/o (RMB mn) 995.0 52w High/Low (RMB) 123.74/83.80 Total Issued Shares (mn) 1340.8

Source: FactSet

Shareholding Structure

WANG's family 64.3%

Source: SSE

Share Performance

Absolute Relative 1-mth -1.6% -0.9% 3-mth -10.2% -5.8% 6-mth -7.8% -6.0%

Source: FactSet

12-mth Price Performance

Source: FactSet

Related reports:

Jiangsu Hengli - 2Q26 preview: Revenue on track but profit hurt by FX; No impact from US foreign robots ban – 29 Jul 2026 (link)

Capital Goods – Strong growth of crane exports in Jun; AWP continues to see surprise – 16 Jul 2026 (link)

Jiangsu Hengli – Takeaways from plant visit: More positive than we thought – 5 Jun 2026 (link)

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR OR http://www.cmbi.com.hk

1

Figure 1: Quarterly results highlights

(RMB mn) 1Q25 1Q26 Change YoY 2Q25 2Q26 Change YoY Total revenue 2,422 3,210 32.5% 2,749 3,623 31.8% Cost of sales (1,468) (1,972) 34.3% (1,539) (2,178) 41.5% Gross profit 954 1,238 29.7% 1,210 1,445 19.5% Other income (27) (28) 4.7% (26) (32) 24.7% S&D expenses (58) (69) 19.0% (46) (77) 68.5% Administrative expenses (137) (166) 21.4% (159) (172) 8.0%

• R&D expense (149) (183) 23.0% (208) (178) -14.6% Asset impairment (4) (16) 266.9% (19) (68) 255.0% EBIT 579 775 33.9% 753 919 22.1% Net finance income/(cost) 199 (162) n/a 69 (32) n/a Other gains/(loss) (59) 124 n/a 65 (28) n/a Profit of JV & associates 1 0 n/a (1) (0) n/a Pretax profit 720 737 2.5% 886 858 -3.1% Income tax (100) (84) -16.6% (73) (73) -0.2% After tax profit 619 654 5.5% 813 785 -3.4% MI (1) (1) -5.3% (2) (1) -22.6% Net profit 618 653 5.6% 811 784 -3.4%

Key ratios ppt ppt Gross margin 39.4% 38.6% -0.8 44.0% 39.9% -4.1

• S&D expense ratio 2.4% 2.2% -0.2 1.7% 2.1% 0.5 Adminstrative exp ratio 5.6% 5.2% -0.5 5.8% 4.7% -1.0 R&D exp ratio 6.1% 5.7% -0.4 7.6% 4.9% -2.7 Effective tax rate 14.0% 11.4% -2.6 8.2% 8.5% 0.2

Source: Company data, CMBIGM

Figure 2: Key assumptions on Hengli

(RMB mn) 2023 2024 2025 2026E 2027E 2028E

Revenue

Hydraulic cyclinder 4,693 4,761 5,254 6,112 6,781 7,453 Hydraulic pump and valve 3,268 3,583 4,326 5,404 6,300 7,192 Hydraulic system 292 296 385 463 532 585 Component 672 684 891 1,070 1,604 2,326 Revenue (hydraulic business) 8,926 9,325 10,856 13,049 15,218 17,556 Other business 59 65 85 95 106 119 Total revenue 8,985 9,390 10,941 13,144 15,324 17,675

Revenue growth

Hydraulic cyclinder 2.4% 1.4% 10.4% 16.3% 10.9% 9.9% Hydraulic pump and valve 18.6% 9.6% 20.7% 24.9% 16.6% 14.2% Hydraulic system 15.1% 1.6% 30.0% 20.0% 15.0% 10.0% Component 17.1% 1.8% 30.3% 20.0% 50.0% 45.0% Revenue (hydraulic business) 9.3% 4.5% 16.4% 20.2% 16.6% 15.4% Other business 96.0% 10.2% 29.9% 12.0% 12.0% 12.0% Total revenue 9.6% 4.5% 16.5% 20.1% 16.6% 15.3%

Gross margin

Hydraulic cyclinder 41.2% 42.6% 39.7% 41.1% 41.6% 42.1% Hydraulic pump and valve 47.6% 47.9% 48.8% 49.0% 49.0% 49.0% Hydraulic system 38.7% 38.1% 34.4% 34.5% 34.8% 35.0% Component 15.9% 14.5% 15.3% 15.8% 18.5% 23.0% Gross margin (hydraulic business) 41.6% 42.5% 41.1% 42.1% 42.0% 42.2% Other business 91.1% 93.9% 96.9% 95.0% 95.0% 95.0% Blended gross margin 41.9% 42.8% 41.6% 42.4% 42.4% 42.5%

Source: Company data, CMBIGM estimates

Figure 3: Hengli’s P/E band

RMB

61x

160

140

49x

120

37x

100

80

25x

60

13x

40

20

0

May-12

May-15

May-19

May-22

May-25

Aug-12

Aug-15

Aug-18

Aug-22

Aug-25

Sept-13

Sept-16

Sept-19

Sept-23

Mar-13

Mar-17

Mar-20

Mar-23

Mar-26

Jan-21

Feb-12

Feb-16

Feb-19

Feb-22

Feb-25

Jun-13

Jan-15

Jun-16

Jan-18

Jun-20

Jun-23

Jan-24

Jun-26

Oct-20

Apr-14

Apr-18

Apr-21

Apr-24

Jul-14

Jul-17

Jul-21

Jul-24

Oct-11

Oct-14

Oct-17

Oct-24

Nov-12

Dec-13

Nov-15

Dec-16

Nov-18

Dec-19

Nov-21

Dec-22

Nov-25

Source: Bloomberg, company data, CMBIGM estimates

Figure 4: Hengli’s P/B band

RMB

13.5x

160

10.5x

140

120

7.5x

100

80

4.5x

60

40

1.5x

20

0

May-12

May-15

May-19

May-22

May-25

Aug-12

Aug-15

Aug-18

Aug-22

Aug-25

Sept-13

Sept-16

Sept-19

Sept-23

Mar-13

Mar-17

Mar-20

Mar-23

Mar-26

Jan-21

Feb-12

Feb-16

Feb-19

Feb-22

Feb-25

Jun-13

Jan-15

Jun-16

Jan-18

Jun-20

Jun-23

Jan-24

Jun-26

Oct-20

Apr-14

Apr-18

Apr-21

Apr-24

Jul-14

Jul-17

Jul-21

Jul-24

Oct-11

Oct-14

Oct-17

Oct-24

Nov-12

Dec-13

Nov-15

Dec-16

Nov-18

Dec-19

Nov-21

Dec-22

Nov-25

Source: Bloomberg, company data, CMBIGM estimates

Financial Summary

INCOME STATEMENT 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Revenue 8,985 9,390 10,941 13,144 15,324 17,675 Cost of goods sold (5,220) (5,368) (6,392) (7,565) (8,834) (10,161) Gross profit 3,765 4,021 4,549 5,579 6,490 7,514 Selling expense (186) (217) (254) (302) (352) (407) Admin expense (404) (592) (649) (762) (873) (1,007) R&D expense (694) (728) (705) (854) (996) (1,149) Others (150) (156) (248) (188) (208) (229) Operating profit 2,330 2,328 2,692 3,472 4,060 4,722 Share of (losses)/profits of associates/JV 0 0 0 0 0 0

EBITDA 2,744 2,758 3,228 4,057 4,693 5,403 Depreciation 413 430 536 585 633 681 Interest income 382 146 (2) 45 204 247 Interest expense (13) (14) (4) (2) (2) (2) Net Interest income/(expense) 369 131 (6) 43 202 245 Other income/expense 131 341 346 394 460 530 Pre-tax profit 2,830 2,800 3,032 3,909 4,722 5,497 Income tax (326) (288) (292) (410) (519) (605) Minority interest (5) (4) (6) (7) (8) (10) Adjusted net profit 2,499 2,509 2,734 3,491 4,194 4,883

BALANCE SHEET 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Current assets 12,994 13,830 15,224 17,064 20,252 23,252 Cash & equivalents 8,124 7,883 8,871 8,952 11,451 13,250 Account receivables 2,767 2,756 3,269 4,653 4,835 5,818 Inventories 1,692 1,765 2,154 2,530 3,037 3,255 Prepayment 156 157 252 252 252 252 Other current assets 255 1,270 677 677 677 677 Non-current assets 4,901 5,808 6,447 6,767 6,939 7,063 PP&E 2,851 3,889 4,998 5,331 5,517 5,654 Deferred income tax 58 139 276 276 276 276 Investment in JVs & assos 0 0 0 0 0 0 Intangibles 467 439 451 437 424 410 Goodwill 0 0 0 0 0 0 Financial assets at FVTPL 0 0 0 0 0 0 Other non-current assets 1,526 1,342 723 723 723 723 Total assets 17,896 19,639 21,671 23,831 27,191 30,314

Current liabilities 3,099 3,379 3,821 3,635 4,294 4,328 Short-term borrowings 203 19 17 17 17 17 Account payables 1,297 1,136 1,792 1,607 2,266 2,300 Tax payable 154 160 231 231 231 231 Other current liabilities 1,445 2,064 1,780 1,780 1,780 1,780 Non-current liabilities 353 431 512 512 512 512 Long-term borrowings 0 0 20 20 20 20 Deferred income 175 212 253 253 253 253 Other non-current liabilities 179 219 239 239 239 239 Total liabilities 3,453 3,810 4,333 4,148 4,807 4,841

Total shareholders equity 14,391 15,775 17,280 19,618 22,311 25,390 Minority interest 52 54 58 65 74 83 Total equity and liabilities 17,896 19,639 21,671 23,831 27,191 30,314

CASH FLOW 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Operating Profit before taxation 2,830 2,800 3,032 3,909 4,722 5,497 Depreciation & amortization 413 430 536 585 633 681 Tax paid (326) (288) (292) (410) (519) (605) Change in working capital (225) (195) (1,256) (1,944) (31) (1,166) Others (15) (269) (209) 2 2 2 Net cash from operations 2,677 2,479 1,811 2,141 4,807 4,410

Investing Capital expenditure (1,309) (1,072) (908) (900) (800) (800) Acquisition of subsidiaries/ investments 0 0 0 0 0 0 Others (1,742) (2,028) 51 (5) (5) (5) Net cash from investing (3,051) (3,100) (857) (905) (805) (805)

Financing Dividend paid (831) (939) (939) (1,153) (1,501) (1,803) Net borrowings (126) (185) 43 0 0 0 Proceeds from share issues 0 0 0 0 0 0 Others 77 336 32 (2) (2) (2) Net cash from financing (880) (788) (864) (1,155) (1,503) (1,805)

Net change in cash Cash at the beginning of the year 6,886 8,124 7,883 8,871 8,952 11,451 Exchange difference 2,492 1,167 899 0 0 0 Cash at the end of the year 8,124 7,883 8,871 8,952 11,451 13,250

GROWTH 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Revenue 9.6% 4.5% 16.5% 20.1% 16.6% 15.3% Gross profit 13.3% 6.8% 13.1% 22.6% 16.3% 15.8% Operating profit 7.9% (0.1%) 15.6% 29.0% 16.9% 16.3% EBITDA 7.5% 0.5% 17.0% 25.7% 15.7% 15.1% Adj. net profit 6.7% 0.4% 9.0% 27.7% 20.1% 16.4%

PROFITABILITY 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Gross profit margin 41.9% 42.8% 41.6% 42.4% 42.4% 42.5% Operating margin 25.9% 24.8% 24.6% 26.4% 26.5% 26.7% EBITDA margin 30.5% 29.4% 29.5% 30.9% 30.6% 30.6% Adj. net profit margin 27.8% 26.7% 25.0% 26.6% 27.4% 27.6%

GEARING/LIQUIDITY/ACTIVITIES 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Net debt to equity (x) (0.6) (0.5) (0.5) (0.5) (0.5) (0.5) Current ratio (x) 4.2 4.1 4.0 4.7 4.7 5.4 Receivable turnover days 116.8 107.4 100.5 110.0 113.0 110.0 Inventory turnover days 120.9 117.5 111.9 113.0 115.0 113.0 Payable turnover days 91.6 82.7 83.6 82.0 80.0 82.0

VALUATION 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

P/E 56.4 56.2 51.5 40.4 33.6 28.9 P/B 9.8 8.9 8.2 7.2 6.3 5.6 Div yield (%) 0.7 0.7 0.8 1.1 1.3 1.5

Source: Company data, CMBIGM estimates. Note: The calculation of net cash includes financial assets.

Disclosures & Disclaimers

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CMBIGM Ratings

BUY : Stock with potential return of over 15% over next 12 months HOLD : Stock with potential return of +15% to -10% over next 12 months SELL : Stock with potential loss of over 10% over next 12 months NOT RATED : Stock is not rated by CMBIGM

OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months

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