Demand for mid- to low-end products is weak, but with the shift to high-horsepower and overseas operations, First Tractor’s profit growth is expected (Nomura)
The report pointed out that against the backdrop of weak domestic demand for mid- to low-end tractors, the company is responding by upgrading to high-horsepower, intelligent products and accelerating overseas expansion.
The report pointed out that against the backdrop of weak domestic demand for mid- to low-end tractors, the company is responding by upgrading to high-horsepower, intelligent products and accelerating overseas expansion. The proportion of overseas revenue has reached 11% in 2025 and is expected to rise to 14% in 2028. Based on product portfolio optimization and cost control, the company's forecast revenue/net profit CAGR from 2026 to 28 is 6.90%/12.48% respectively. The profit growth rate exceeds revenue, and the gross profit margin is expected to increase from 15.1% to 16.0%. One-sentence conclusion: First Tractor is successfully crossing the industry cycle through product upgrades and globalization strategies, with strong certainty of profit growth. It is a target with structural growth logic in the agricultural machinery sector. Good/bad: Good for First Tractor (601038). The market may be overly concerned about its weak domestic demand and ignore the potential of its product upgrades and overseas expansion. There is room for recovery in the stock price. Catalysts: 1) The increase in the sales proportion of high-horsepower tractors; 2) Order data from overseas markets (especially Russia and Southeast Asia); 3) Changes in agricultural machinery subsidy policies.