On Friday, JPMorgan (NYSE:JPM) upgraded Sany Heavy Equipment (600031:CH) (OTC: SNYYF) stock from Neutral to Overweight, increasing the price target to RMB21.60 from RMB15.00.
The firm cited an improved outlook for the construction machinery industry, bolstered by China's comprehensive policy support, which is expected to stimulate domestic demand.
The upgrade follows Sany's investor meeting held on Thursday, where the company projected a 15% year-over-year revenue growth for the fiscal year 2024. This marks a significant increase from the 4.8% year-over-year growth reported in the first half of 2024. The company also anticipates gaining a larger share of the market.
According to JPMorgan, Sany Heavy Equipment's strong operational cash flow generation and effective risk control measures warrant a valuation premium compared to its competitors, such as Zoomlion and XCMG. The firm's positive stance is also supported by the potential for increased exports starting from the third quarter of 2024.
In light of the favorable domestic and export environment, JPMorgan has raised its FY24 to FY26 earnings estimates for Sany by approximately 10%. This revision underpins the new price target of RMB21.60, suggesting around a 25% upside from the previous target.
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