We believe the fast-growing mining trucks sales will enable SANYI to benefit from the rising metal prices. Besides, industrial robot and crusher will serve as important growth drivers for SANYI. While we took our earnings forecast in 2020E-22E down by 6-9%, mainly due to the change in product mix and lower government subsidies, we believe the continuous introduction of new products will help SANYI achieve sustainable growth which will lift valuation. We revised up our TP from HK$5.66 (15x 2020E P/E) to HK$10.50 (24x 2021E P/E, on the back of 24% earnings CAGR in 2021E-22E). Maintain BUY.
- Wide-body truck will serve as the key growth driver. We estimate the sales volume of wide-body truck reached 1.1k units in 2020E. We forecast SANYI to deliver 2k units in 2021E, driven by both domestic and overseas demand. In particular, we understand that SANYI already won 600 units of backlog in overseas. At present, 60t is the major model. SANYI has started introducing 70t wide-body truck in the market and is on-track to launch 80t and 100t models in future. We estimate the revenue contribution by wide-body truck will increase from 12% in 2019 to 23% in 2022E.
- Crusher machinery a new growth driver. Driven by environmental protection policies, there has been an uptrend of machine-made sand output in China with the proportion rising from ~60% in 2011 to ~75% in 2019. Such trend has continued to boost the demand for crusher machinery. SANYI plans to launch crusher machinery in 2021E with a focus on mid-to-high end segment. We expect this will serve a new growth driver starting 2021E.
- Robot business the next growth driver. In early 2020, SANYI and SANY Group (parent company) set up a JV, namely SANY Robot Technology (stake: 65%/35%), to develop the technologies in the field of sensory perception, autonomous decision and automatic control. The JV focuses on the components for electric forklift, automated guided vehicle (AGV) and industrial robot. We estimate the JV started generating revenue through internal sales in 2020 (2-3% of total revenue).
- Acquisition to expand robot business. In Jan 2021, SANYI acquired 70% stake in SANY Construction Robot (Xian) Research Institute from SANY Construction Technology (a company owned by the major shareholder of SANYI) for a consideration of RMB17.8mn (3.2x 2020 P/B). The acquisition will help SANYI expand to construction robots.
