Henan Pinggao Electric Co :Key Ultra High Voltage beneficiary with growth/yield;initiate CL-Buy发布时间：2016-06-08 研究机构：高盛高华证券
Source of opportunity
China’s top high voltage switchgear maker, Henan Pinggao Electric is wellplaced to be a key beneficiary of China’s potential USD117bn investment inultra-high voltage (UHV) power lines over the next 5 years, thanks to its marketleadingshare in the least crowded gas insulated switchgear (GIS) space andhigh earnings exposure to UHV. Longer term, we see market consolidation innon-UHV GIS and new products also driving faster revenue/net income growth.
With Pinggao trading at a 12m forward P/E of 13.9x, more than 1SD belowhistorical avg., the stock is yet to reflect its strong growth prospects, in our view.
We initiate at CL-Buy with our 12m target of Rmb19.5 implying 32% upside.
We see the following earnings/share price catalysts for Pinggao: 1) UHV GISdriven by accelerating UHV investment in 2016-20E as China adds anadditional 29 lines (vs. 11 lines through 2015) and Pinggao’s leading marketshare in the GIS product with the fewest suppliers and highcapital/technology entry barriers; 2) non-UHV GIS driven by sustainedmarket consolidation toward leading suppliers amid an industry shift infocus toward product quality over price; 3) Vacuum interrupters and EVcharging piles driven by China’s Rmb2tn distribution network investmentover 2015-20 and growing demand for vacuum circuit breakers, and ouroutlook for a 31% 2015-20 CAGR in EV charging infrastructure investmenton the back of China’s target to add 4.8 mn/12,000 separate EV chargingpiles/focused EV charging stations by 2020.
We derive our 12-month target price of Rmb19.5 based on 2017E EV/GCI vs.
CROCI/WACC against sector peers (cash return multiple at 1.04x), whichimplies 32% upside. We see the 12x 2017E P/E and 5% 2017E dividend yieldas attractive vs. peer medians of 17x and 1%, respectively.
Lower-than-expected UHV investment; slower-than-expected marketconsolidation; weaker-than-expected new product rollout.
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