Haitian’s sales and net profit went up by 25.7% and 23.5% YoY in 1H24 respectively, even 3% and 3.7% higher than our revised estimate. Gross margin expanded slightly to 32.3% in 1H24 from 32% in 1H23. SG&A cost rose by 13.9% YoY in 1H24, much lower than top-line growth, contributing to the net profit growth. Domestic and overseas sales rose by 33.7% and 13.2% YoY respectively in 1H24 due to the low base and some recovery in domestic market. Entering the USD interest rate cut cycle, global demand is set to recover. Haitian is the best machinery pick. We retain earnings estimate and TP unchanged. TP HK$28.81 implies 26% upside, reiterate BUY.
　　Key Factors for Rating
　　Haitian reported the best industrial interim results with both sales and net profit up by 25.7% and 23.5% YoY in 1H24. Breaking revenue down by geography, domestic and overseas revenue increased by 33.7% and 13.2% YoY in 1H24. The strong growth in domestic market is partly attributed to the demand recovery in March-April, and partly to the increase in export of plastics products. Breaking revenue down by product, Mars sales units rose by 46% YoY in 1H24, much higher than 14.9% YoY of Jupiter sales units and 35% YoY growth of Zhafir. It indicates the revenue growth was mainly contributed by small plastic products, not the large parts of auto sector or home appliance. It was in line with the general export growth.
　　Gross margin expanded slightly to 32.3% in 1H24. SG&A cost rose by only 14% YoY in 1H24, one of the major reasons behind the net profit growth despite the decline in foreign exchange gain. Net margin remained stable.
　　Overseas sales portion declined from 39.2% in 1H23 to 35.4% in 1H24. However, we expect overseas sales will pick up the growth momentum as the USD interest rate cut will boost global demand. Haitian is ready to expand global market share. In the medium term, overseas will contribute around 50% of revenue for Haitian.
　　Key Risks for Rating
　　Export of PIMM machines or plastics products may be affected by the global politics.
　　Valuation
　　We retain earnings estimate and TP unchanged. Haitian is the best machinery play as it expands market share in both domestic and overseas markets. We reiterate BUY rating with 26% upside.