Haitian guided new order to grow by over 30% YoY in 3Q24, and nearly 30% YoY in October, but would likely slow down in year end. The slowdown is partially attributable to the high base from last year end due to the aggressive marketing strategy rolled out in 2H23, as well as the softening demand in domestic market. In 2H24, especially in 4Q24, the new order in domestic market slowed both on YoY and MoM basis. In 2H24, export outperformed the domestic sales and became the major growth driver. But looking ahead, the tariff hike and the trend of de-globalisation would likely add uncertainty to the export-oriented manufacturers even though Haitian’s direct sales exposure towards the US was only 2%. Haitian’s fundamental is solid with ample cash, but the overseas market may face some headwinds in 2025. We retain BUY rating.
　　Key Factors for Rating
　　In 1H24, the domestic sales significantly outperformed export thanks to the new order related to Olympic game, the acceleration of domestic orders (that produce goods for export on anticipating the tariff hike), and the restocking triggered by the domestic sales growth driven by policy easing. Some domestic clients use PIMM (plastics injecting molding machine) to manufacture plastics goods for export. Therefore, the overall export exposure, including direct and indirect portions, could be as high as 50% for Haitian.
　　In 2H24, owing to the US$ interest rate cut cycle and some rush orders to race ahead of the tariff hike, the export new order started to grow faster than the domestic ones. Domestic demand weakens in 2H24 was another reason. Haitian guided the new order grew by over 30% YoY in 3Q24, and nearly 30% YoY in October, but would likely slow down in year end. In some months during 1H24, the growth rate even exceeded 40% YoY.
　　Haitian has around 30% direct export sales, and around 10-20% indirect export exposure contributed by its export-oriented downstream clients, which makes it one of the industrial product manufacturers with the highest export exposure. The US tariff hike would affect various countries, and likely exacerbate de-globalisation trend. Although Haitian’s direct sales exposure to the US was only 2%, the spreading of de-globalisation would bring headwinds to exporters. In the meantime, the domestic demand recovery is uncertain, largely depending on the policy implementation and the monetary easing in 2025.
　　Key Risks for Rating
　　Tariff hike and de-globalisation.
　　Valuation
　　Haitian held RMB10.7bn cash by June 2024, one of the industrial plays with the strongest financial strength. We forecast the annual results would likely beat our estimate, but the forthcoming trend is under challenge on high base, tariff hike, and the uncertain domestic stimulus policy. BUY rating and TP are retained.