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Pinggao Electric Alert:Strong 1H16results driven by UHV delivery;Buy

发布时间:2016-08-02    研究机构:德意志银行

Pinggao reported strong 1H16 results, with net profit +79% driven by moreUHV GIS shipment. It is in line with preliminary result announcement issuedearlier. Management revised up full-year UHV GIS delivery guidance to 30-33sets (from prior 27-30) based on current schedule, suggesting a strong 2H16growth momentum. We believe the proposed parentco asset injection(scheduled to be completed by end-16) is strategically positive for Pinggao,even though it should be EPS impact neutral after share placement (c.19%dilution). Maintain Buy.

Strong 1H16 results; revising up full-year UHV GIS delivery guidance

In 1H16, Pinggao delivered 14 sets of UHV GIS, vs. 6 in 1H15. As a result,revenue rose 35% yoy, gross margin expanded 7ppt yoy to 37% and net profitjumped 79% yoy to Rmb525m. Management revised up their full-year UHV GISdelivery guidance to 30-33 sets (from prior 27-30), implying 16-19 to bedelivered in 2H (vs. 14 in 2H15).

Rmb1.7bn of UHV orders won year-to-date, likely more to come

Pinggao has won Rmb1.7bn of UHV orders YTD, incl. Rmb1.1bn from Ximeng– Shengli AC project, c.Rmb270m from Zhundong – South Anhui DC projectand Zhalute-Qingzhou DC project, Rmb368m from two UHV-complementarypower plants in Shanxi/Shaanxi. Key equipment of the UHV orders are 16 setsof 1000kV GIS, ASP of which are slightly lowered to Rmb85-90m compared toc.Rmb90m for those in 2015. For rest of the year, we expect at least one moreUHV orders from Shandong AC project, which have already opened tender inlate July. Pinggao is likely to win around 10 UHV GIS out of a total 24 fromShandong AC project, based on its historical UHV GIS market share (>40%).

Parentco asset injection and share placement target to be completed in 2H

Pinggao plans to acquire five companies from parentco and set up a GIS plantin India, funded by share placement (max.219m shares). The deal was firstlyannounced in Nov 15 and then received approval from China SecuritiesRegulatory Commission in July 16 (valid until 22 Jan 2017). It targets tocomplete the deal by end of this year, while exact timing depends on stockmarket situation. The proceeds from share placement, if completed, would beprimarily utilized for asset acquisition from parentco (Rmb3bn) and capitalinjection in acquired assets and Tianjin Pinggao (Rmb1.2bn) with priority,followed by Indian plant investment (Rmb676m).

We consider the deal strategically positive as it is a move to better positionitself for long-term growth by strengthening low-mid voltage GIS and switchproduct offering and export capability. The parentco asset injection, ifcompleted, could present c.20% upside to the company’s FY17E earnings(FY17 net profit of acquired assets guaranteed at >Rmb271m), while EPSimpact should be neutral after factoring in 19% share dilution. We currentlyhave not yet factored in the deal in our financial forecast.

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