Profit in 2025 a negative surprise; Looking for improvement in 2026

Profit in 2025 a negative surprise;Looking forimprovement in 2026 Target PriceHK$20.60Up/Downside72.2%Current PriceHK$11.96 SANYI pre-announced over the weekend that its after-tax profit in 2025 isexpected to grow 50-73% YoY to RMB1.6-1.85bn (on reported basis), duelargely toa sharpreduction of impairment losson goodwill and properties. Onrecurring basis(excluding impairment),however, we calculate that theprofit in2025would be-10% to +4% YoYto ~RMB1.67-19.2bn.The profit rangeis16-27% below our estimate, and19-30% below Bloomberg consensus.Based onour understanding,the negative earnings surprise was due to some one-offexpenses related to port equipment, as well as higher-than-expected operatingexpensesrelated to solar power business.Despite the weak earnings in 2025,we see SANYI having a good start in 2026, driven by strong orders for miningtrucks and high visibilityonport equipment. We also expect SANYI’soil & gasequipment segment will benefit from the current high oil and gas prices. We willrevise our earnings forecast after the announcement of annual results (Mar 31).We haveaBUYratingandTPofHK$20.6, based on 20x 2026EP/E(equivalenttothepeak level since 2017,to reflect the rising earnings visibility driven by thecommodity upcycle). China Capital GoodsWayne FUNG, CFA(852) 3900 0826waynefung@cmbi.com.hk Stock Data Risks:(1)weakness of coal mining activities in China;(2) slowdown ofemerging business; (3)cost inflation due to elevated commodity prices. Source: FactSet Related reports: SANYI(BUY)-Mining truck gainingtraction; Higher earnings forecast and TP–20 Feb 2026 (link) Capital Goods–Key themes in 2026;Focus on Mining equipment + Power fordata centres + Replacement cycle–1Dec 2025 (link) Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflecthis or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirmsthat neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered in this report; and (4)have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a whollyownedsubsidiary of China Merchants Bank) Important DisclosuresThere are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIGM does not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives, financial positionor special requirements. Past performance has no indication of future performance, and actual events may differ materially from that which is contained in thereport.The value of, and returns from, any investments are uncertain and are not guaranteed and may fluctuate as a result of their dependence on theperformance of underlying assets or other variable market factors.CMBIGMrecommends that investors should independently evaluate particular investmentsand strategies, and encourages investors to consult with a professional financial advisor in order to make their own investment decisions.This report or any information contained herein, have been prepared by theCMBIGM, solely for the purpose of supplying information to the clients ofCMBIGM or its affiliate(s) to whom it is distributed. This report is not and should not be construed as an offer or solicitation tobuy or sell any security or any interest insecurities o