UBS: ZOOMLION(01157) most negatively affected by Middle East conflict, China CSSC(600150.SH) benefits

UBS released a research report stating that ZOOMLION (01157) may be the most negatively affected due to its relatively high proportion of business in the Middle East and low proportion in the mining industry. The rating is "neutral" with a target price of 7.8 Hong Kong dollars. On the other hand, leading shipbuilding company China CSSC (600150.SH) stands out and may be positively impacted. The rating is "buy" with a target price of 45.8 Chinese yuan. UBS believes that if the Middle East conflict continues, the direct negative impact on the Chinese industrial sector will be relatively limited, as most companies in the region have less than 10% of their revenue from there. Although the direct impact of the conflict is mainly seen in financial terms (e.g. changes in revenue and increased transport costs), the indirect impact - sometimes overlooked by investors - needs to be closely monitored, as the conflict may affect the outlook for product/industry demand. The rise in oil and gas prices has minimal impact on the industrial companies covered by the bank, but the resulting increase in coal prices may push up electricity prices slightly, increase production costs, and potentially lead to changes in product mix (increased demand for electrification products). According to the bank's analysis, shipbuilding is the only sub-sector in the Chinese industrial sector that may be positively affected, while mining and new energy equipment may indirectly benefit. Chinese construction machinery is likely to be the most negatively affected by the direct and indirect impacts of the conflict. UBS believes that the impact on other sub-industries is relatively limited.