Florian Weidinger of Santa Lucia Asset Management presented his investment thesis on Zoomlion Heavy Industry Science and Technology Co. Ltd. (HK: 1157) at Asian Investing Summit 2025, held from April 8-11.
Thesis Summary
Zoomlion is a Hunan-based SOE and a dominant player in China’s construction machinery sector, recently trading at 8.9x FY25E earnings with a 6.1% dividend yield. Despite its association with the struggling domestic real estate sector, the business is increasingly diversified, both geographically and across equipment categories. Overseas operations—where gross margins are materially higher—are expanding rapidly, now supported by a structural mix shift into aerial work platforms, earth-moving, mining, and agricultural machinery. Zoomlion’s foreign sales are still at an early stage, but with only 10% global market share, the company sees significant headroom in Belt and Road countries, as well as emerging markets in Europe and South America.
The investment thesis is anchored by multiple variant views on China. First, SOEs like Zoomlion, once seen as value traps, are undergoing structural reform. Incentives have shifted from asset hoarding to return optimization, leading to better capital allocation, dividends, and buybacks. Zoomlion is 15% owned by management and insiders—including through ESOPs—while the Hunan government retains a 14.5% stake. This alignment is reinforced by corporate actions: in October 2024, the company announced intentions to buy back H-shares, providing additional shareholder support.
Second, Zoomlion is a direct beneficiary of narrowing valuation gaps between its Hong Kong-listed H-shares and the more expensive Shanghai-listed A-shares. With a 32% A-H discount, the H-shares provide a margin of safety, and increasing Southbound interest—Chinese investors using Hong Kong’s Connect program to buy local equities—offers a catalyst for re-rating. Southbound Connect ownership of Zoomlion’s H-shares rose from 9% in June 2023 to nearly 29% by March 2025, reflecting growing domestic investor confidence in its international prospects and governance reform.
Finally, this is a business that’s being overlooked due to stale narratives. While domestic construction demand has weakened, replacement demand, policy moderation, and a sizable installed base offer downside protection. With foreign revenue ramping up, a structurally improving mix, and strong insider ownership, Zoomlion offers an underappreciated way to participate in both SOE reform and China’s shifting global industrial footprint. Investors are getting paid to wait through an above-market dividend and potential for valuation convergence, making Zoomlion a classic value play with meaningful optionality and multiple paths to upside.
Disclaimer
The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
Slides
Let’s listen to the presentation and Q&A and look over the transcript.
