SANYI’s share price dropped 16% last Fri (30 Oct) after the release of 3Q26 results. We think that the market was concerned about the contraction of margin and slowdown of mining truck sales (+48% YoY vs +1.6x YoY in 2Q). However, we believe the pullback was overreacted, as (1) the margin contraction was largely due to a change in revenue mix rather than a weakness of pricing power; (2) overseas mining truck sales growth outlook remains solid with sales target (VAT-included) of RMB10bn in 2027E (RMB8bn in 2026E). While we revise down our 2026E-28E earnings forecasts by 4-8% due to lower profit forecasts on road headers, lithium, oil & gas equipment, we are staying positive on SANYI’s structural penetration of large mining trucks overseas and the solid growth of port machinery. We roll over our valuation base to 2027E, with new target price of HK$15.8 based on 14x P/E (historical average + 1SD to reflect the upcycle of mining equipment sector, vs our previous multiple of 20x based on peak valuation).
3Q26 earnings highlight. Revenue grew 26% YoY to RMB7.4bn in 3Q26, driven by strong growth of mining truck, CCMU and port machinery, which more than offset the decline in road header sales. Blended gross margin dropped 3.3ppts YoY to 20.9%, due largely to a change in revenue mix (lower contribution of higher margin road header). Net profit grew 8% YoY to RMB446mn.
Clear target of mining truck sales. SANYI targets to achieve overseas mining truck sales of RMB10bn in 2027E (including after-market revenue). At present, orders come mainly from Asia Pacific, Latin America and Africa. In particular, the high gold and copper prices have boosted mining capex in Latin America. Besides, SANYI has signed initial agreement with major miners in Australia to promote 200T electric mining trucks. Breakthrough in Australia is expected over the coming 2-3 years.
Key risks: (1) further weakness of coal mining activities in China; (2) higher- than-expected operating loss of emerging business; (3) cost inflation due to elevated commodity prices.