Zoomlion: Construction Machinery Leader Undergoing Structural Reform

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.

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. The company’s 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.

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About the instructor:

Florian Weidinger is the CEO of Santa Lucia Asset Management (SLAM), a pan-Asian Singapore-based investment management business. Prior, he was the founder of Hansabay a specialist in active engagement and special situation investing, and one of the early adopters of the PRI Principles for Responsible Investment in Singapore. Hansabay contributed its activities into SLAM during 2021. Earlier in his career, Florian Weidinger was a vice president at Lehman Brothers where he last worked for the insolvency administration, after several years with the risk arbitrage, principal investing and investment banking divisions in London. Mr. Weidinger has sourced, managed and executed public and private investments in Europe, Africa and Asia, and across the capital structure. Strategies included event-driven, long/short, distressed/credit and special situations investing. Mr. Weidinger has held multiple board directorships across sectors, including in the public markets. Mr. Weidinger holds a BSc from City University London, an MBA from the Stanford Graduate School of Business, and an MS in Environment and Resources from Stanford University’s School of Earth Sciences.

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