HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd-8806deaf-04c9-4411-b1ee-92e813b9c5e0" target="_blank" data-smartkarma-citation="entities:45955:1" rel="noopener">Sany Heavy Industry (6031 HK)</a> has rallied 15.3% after its IPO, and 3Q25 earnings are in a consistent trend. We do not expect a significant change in earnings forecasts. </li>
<li>The mere 0.1% discount to its A-share looks rich. The FY26F PER of 17.7x is also significantly higher than its peers, reflecting most of its strengths.</li>
<li>Even if it re-rates to a similar premium as <a href="https://www.smartkarma.com/entities/jiangsu-hengrui-pharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:44224:1" rel="noopener">Jiangsu Hengrui Pharmaceuticals (1276 HK)</a>, the upside is only 5.8%. The risks clearly outweigh the return.</li>
</ul>



Sany Heavy Industry (6031 HK) has rallied 15.3% after its IPO, and 3Q25 earnings are in a consistent trend. We do not expect a significant change in earnings forecasts. 
The mere 0.1% discount to its A-share looks rich. The FY26F PER of 17.7x is also significantly higher than its peers, reflecting most of its strengths.
Even if it re-rates to a similar premium as Jiangsu Hengrui Pharmaceuticals (1276 HK), the upside is only 5.8%. The risks clearly outweigh the return.


Sany Heavy Industry (6031 HK): What to Do Now After the IPO?

Equity Capital Markets

Sany Heavy Industry / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:20183:1" rel="noopener">Sany Heavy Industry (600031 CH)</a>'s IPO price range is set at HK$20.3-21.3, aiming at raising HK$11.9bn based on the mid-point IPO price.</li>
<li>Key strengths are excellent growth potential globally, a leading market position, excellent R&amp;D capability, and a solid financial track record.</li>
<li>Sany Heavy's fair valuation is a 5-10% discount to its A-share, in our view, implying an H-share price of HK$22.06-23.29, leaving limited upside from the IPO level.</li>
</ul>



Sany Heavy Industry (600031 CH)'s IPO price range is set at HK$20.3-21.3, aiming at raising HK$11.9bn based on the mid-point IPO price.
Key strengths are excellent growth potential globally, a leading market position, excellent R&amp;D capability, and a solid financial track record.
Sany Heavy's fair valuation is a 5-10% discount to its A-share, in our view, implying an H-share price of HK$22.06-23.29, leaving limited upside from the IPO level.


Sany Heavy Industry IPO: Valuation Assessment

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:20183:1" rel="noopener">Sany Heavy Industry (600031 CH)</a>, the world’s third-largest construction machinery company, has filed its PHIP for an H Share listing to raise US$1.0-1.5 billion.     </li>
<li>SANY has six operating segments. The largest segment, as measured by revenue and gross profit, is excavating machinery.</li>
<li>The fundamentals are good, with strong growth, an increasing overseas mix, an improving margin profile, strong cash generation, and a solid balance sheet. </li>
</ul>



Sany Heavy Industry (600031 CH), the world’s third-largest construction machinery company, has filed its PHIP for an H Share listing to raise US$1.0-1.5 billion.     
SANY has six operating segments. The largest segment, as measured by revenue and gross profit, is excavating machinery.
The fundamentals are good, with strong growth, an increasing overseas mix, an improving margin profile, strong cash generation, and a solid balance sheet. 


SANY Heavy Industry H Share Listing: The Investment Case

Event-Driven

Mitsubishi Logisnext Co., Ltd. / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mitsubishi-logisnext-co-ltd" target="_blank" data-smartkarma-citation="entities:11662:1" rel="noopener">Mitsubishi Logisnext Co., Ltd. (7105 JP)</a> announced a pre-conditional tender offer from Japan Industrial Partners (JIP) at JPY1,537 per share, representing a 15.3% discount to the last close price.</li>
<li>The offer resulted from an auction process. The offer is light in comparison to peer multiples and is below the midpoint of the target IFA DCF valuation.</li>
<li>While <a href="https://www.smartkarma.com/entities/mitsubishi-heavy-industries" target="_blank" data-smartkarma-citation="entities:13613:1" rel="noopener">Mitsubishi Heavy Industries (7011 JP)</a> irrevocable has a competing proposal clause, it is unlikely that a bidding war will transpire. The low required tendering rate suggests a done deal. </li>
</ul>



Mitsubishi Logisnext Co., Ltd. (7105 JP) announced a pre-conditional tender offer from Japan Industrial Partners (JIP) at JPY1,537 per share, representing a 15.3% discount to the last close price.
The offer resulted from an auction process. The offer is light in comparison to peer multiples and is below the midpoint of the target IFA DCF valuation.
While Mitsubishi Heavy Industries (7011 JP) irrevocable has a competing proposal clause, it is unlikely that a bidding war will transpire. The low required tendering rate suggests a done deal. 


Mitsubishi Logisnext (7105 JP): JIP’s Takeunder Offer

<ul>
<li>Strong industry sales of wheel loaders (+10.4% YoY) and excavators (+18.8%) in Jul-Aug suggested that the current consensus earnings forecasts are too conservative. </li>
<li>
<a href="https://www.smartkarma.com/entities/lonking-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3944:1" rel="noopener">Lonking Holdings (3339 HK)</a> will also benefit from the strength of the equities market, given it has an investment portfolio of Rmb2.4bn, or 18.6% of its market capitalisation.</li>
<li>Given net cash equalling HK$2.02/share, or 66.1% of its share price, its 10.3x PER and 4.5% dividend yield for FY25F still appear undemanding. </li>
</ul>


Strong industry sales of wheel loaders (+10.4% YoY) and excavators (+18.8%) in Jul-Aug suggested that the current consensus earnings forecasts are too conservative. 

Lonking Holdings (3339 HK) will also benefit from the strength of the equities market, given it has an investment portfolio of Rmb2.4bn, or 18.6% of its market capitalisation.
Given net cash equalling HK$2.02/share, or 66.1% of its share price, its 10.3x PER and 4.5% dividend yield for FY25F still appear undemanding. 


China

Guangxi Liugong Machinery Co. Ltd. manufactures and markets construction machinery including loaders, excavators, road rollers, and related parts.

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Guangxi Liugong Machinery A (000528 CH)

Sany Heavy Industry (6031 HK): What to Do Now After the IPO?

Sany Heavy Industry's strong IPO performance and consistent earnings trend are still unable to justify its current valuation. It is not cheap on...

Osbert Tang, CFA

Sany Heavy Industry IPO: Valuation Assessment

Sany Heavy's IPO price range is HK$20.3-21.3, with key strengths in global growth potential, market position, R&D capability, and financial track...

Osbert Tang, CFA

Mitsubishi Logisnext (7105 JP): JIP’s Takeunder Offer

The offer is light in comparison to peer multiples and is below the midpoint of the target IFA DCF valuation. However, the low required tendering...

Arun George

Lonking (3339 HK): Still Well Placed

Strong industry sales of wheel loaders and excavators in Jul-Aug indicate that earnings forecasts may be too conservative. With strong net cash,...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

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Sany Heavy Industry (6031 HK): What to Do Now After the IPO?

​Sany Heavy Industry's strong IPO performance and consistent earnings trend are still unable to justify its current valuation. It is not cheap on...

Osbert Tang, CFA

Sany Heavy Industry IPO: Valuation Assessment

​Sany Heavy's IPO price range is HK$20.3-21.3, with key strengths in global growth potential, market position, R&D capability, and financial track...

Osbert Tang, CFA

SANY Heavy Industry H Share Listing: The Investment Case

Sany Heavy, the world’s third-largest construction machinery company, has filed its PHIP for an H Share listing to raise US$1.0-1.5 billion. In...

Arun George

Mitsubishi Logisnext (7105 JP): JIP’s Takeunder Offer

The offer is light in comparison to peer multiples and is below the midpoint of the target IFA DCF valuation. However, the low required tendering...

Arun George

Lonking (3339 HK): Still Well Placed

​Strong industry sales of wheel loaders and excavators in Jul-Aug indicate that earnings forecasts may be too conservative. With strong net cash,...

Osbert Tang, CFA

Sany Heavy Industry's strong IPO performance and consistent earnings trend are still unable to justify its current valuation. It is not cheap on...

Sany Heavy's IPO price range is HK$20.3-21.3, with key strengths in global growth potential, market position, R&D capability, and financial track...

Strong industry sales of wheel loaders and excavators in Jul-Aug indicate that earnings forecasts may be too conservative. With strong net cash,...