We, together with >30 investors, joined SANYI’s plant visit tour in Zhuhai’s port machinery production base yesterday （25 July）。 Key positives: （1） SANYI is confident of achieving revenue growth of 100%/50% YoY in overseas port machinery in 2023E/24E; （2） revenue from telescopic forklift will potentially reach RMB1bn in 2023E and double in 2024E; （3） electrification of reach stackers & empty container handlers is on a good track; （4） gross margin of large port machinery is improving. The positive management tone reaffirms our positive stance on the structural growth outlook of SANYI. While share price marked a record high yesterday, we expect the momentum to continue with catalysts coming from positive guidance upon the release of interim results in August. Reiterate BUY with unchanged TP of HK$16.2 （19x 2023E）。 SANYI remains our sector top pick.
　　Huge potential of telescopic forklift. Telescopic forklift （伸缩臂叉车） is a product widely applied in Europe and the US （80% of global demand）， with major downstream applications in industrial （70%） and agricultural sector （30%）。 The global market size is ~RMB40bn. SANYI has been cooperating with four major leasing companies in the US. Currently, SANYI’s telescopic forklifts are produced in India （150 units of monthly capacity）， where labour cost is only half of that in China. Despite the use of overseas’ components （in order to reduce the risk of tariff in Europe and the US）， SANYI is managed to maintain cost advantage （10% below the major competitors such as JLG and JCB）。 Gross margin is currently ~25%. SANYI plans to build a new factory in Turkey.
　　Electrification of small port machinery. Electric ratios of reach stackers （ 正 面 吊 ） and empty container handlers （ 堆 高 机 ） are 20% and 80% respectively. The price of the electric reach stacker is ~RMB3mn, versus the diesel model of ~RMB2.5mn. The annual operating cost of an electric reach stacker is only ~RMB100k, which is much lower than that of the diesel model （RMB400-500k）， making it very attractive to customers. The continuous electrification will help drive ASP going forward.
　　Large port machinery: Solid backlog and margin expansion. With the expansion of large port machinery capacity, SANYI is confident of expanding the market share. SANYI recently received orders for >40 units of gantry cranes from Hutchison. Besides, Maersk, in order to achieve its net-zero targets, has gradually increased the procurement of electric cranes. SANYI’s current backlog of large port machinery is >RMB3bn. Most importantly, gross margin has been significantly improved to ~14% （versus single digit last year）。