We upgrade to "Buy", and increase TP to HK$27.50. Recent company earnings releases and customs records indicate a recovery in demand for plastic injection molding machines (“PIMM”). Therefore, we adjust our Haitian International (the “Company”) 2024-2026 shareholders' net profit forecasts to RMB3,075 mn (+11.4%), RMB3,257 mn (+9.2%), and RMB3,215 mn (-0.2%), respectively. Our new 2024-2026 gross margin forecasts are adjusted to 33.4% (+0.9 ppts), 33.0% (+0.4 ppts), and 32.3% (-0.5 ppts), respectively. We forecast the Company's earnings per share in 2024, 2025, and 2026 to be RMB1.927 (+11.4%), RMB2.055 (+9.2%), and RMB2.009 (-0.2%), respectively. Our TP represents 13.3x, 12.5x, and 12.7x 2024-2026 PE ratio and 2.0x 2024 PB ratio.
　　Competitor LK Tech’s (00558 HK) PIMM segment grew 40.7% for the six months ending March 31st, 2024. Demand for PIMMs typically follows a 3-4 year cycle. LK Tech’s PIMM segment posting strong results indicates a recovery in demand for the entire industry following the lows of the cycle.
　　It can be expected that Haitian International’s sales of PIMMs will also recover significantly in the following year.
　　China’s exports of plastic injection molding machines was strong in the five months ending May 2024. According to the General Administration of Customs of the PRC, export values of injection molding machines increased by 14.1% for a total value of RMB 5289.3 mn for the five months ending May 2024. Exports of plastic goods increased by 12.1% YoY for the five months ending May 2024. The Company, which derived 39.4% of its revenue from exports overseas in 2023, is expected to be one of the prime beneficiaries of this trend.
　　Catalysts: Interim earnings release validating domestic demand recovery.
　　Risk factors: Domestic recovery may be less than expected; Potential international policy risk.