1Q26 EBIT +34% YoY above expectation; net profit dragged by FX loss

1Q26 EBIT +34% YoY above expectation; netprofit dragged by FX loss Target PriceRMB109.00Up/Downside12.4%Current PriceRMB96.94 Hengli’s 1Q26 net profit came in at RMB653mn,which increasedonly6%YoYlargelydue totherecognitionof net finance expense(RMB162mn vsnet financeincome ofRMB199mnin 1Q25)as a result ofthe appreciation of RMB. EBITgrew 34% YoY to RMB775mn, driven by an impressive revenue growth of33%YoY.Meanwhile,operatingcash inflowin 1Q26surged 9x YoYfrom a low baseto RMB518mn.We see theseasa set ofdecentoperating results. We think FXvolatilityisnormal and believe itshouldnot affect the core valuation of Hengli.MaintainBUYwithanunchangedTP of RMB109,based on42x 2026EP/E(+1SD above the historical average unchanged, to reflect the machinery upcycleand humanoid robot components growth). China Capital GoodsWayne FUNG, CFA(852) 3900 0826waynefung@cmbi.com.hk Stock Data Related reports: Risk factors:(1) Slowdown of demand for hydraulic components; (2)slower-than-expected new business development. Jiangsu Hengli–4Q25 earnings miss ongross margin and FX loss; Butstructuralgrowth outlook still intact–21 Apr 2026(link) Capital Goods–Strong export of earth-moving machinery in Feb–9 Mar 2026(link) Capital Goods-Strong momentum ofnon-earth-moving machinery sales in Jan–16 Feb 2026 (link) Source: Bloomberg,company data, CMBIGM estimates Source: Bloomberg,companydata, CMBIGM estimates 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 reflect his 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 confirms that 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 the date 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 CapitalCorporation Limited (a wholly ownedsubsidiary 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 orother 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 or enter into any transaction.NeitherCMBIGMnor any of its affiliates,shareholders, agents, consultants, directors, officers or employees shall beliable for any loss, damage or expense whatsoever, whether direct or consequential, incurred in relying on the information contained in this report.Anyonemaking use of the in