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Henan Pinggao Electric Co:Above expectations;UHV/consolidation/new products well on track

发布时间:2016-08-05    研究机构:高盛高华证券

Pinggao reported 1H16 revenue/net profit of Rmb2.6bn/525mn, +35%/+79%yoy, reaching 35%/48% of prior 2016 GSE, above the past 3-year average of36%/36%. The beat is mainly on the gas insulated switchgear (GIS) grossmargin expanding by 9.7pp yoy to 41.8%, due to favorable mix shift towardUltra-High Voltage (UHV) in our view. Key highlights: 1) The companyguides for 2016 net profit yoy growth of 30-56%, or Rmb1,075-1,292mn excl.

potential acquisition. 2) Ytd UHV GIS new order remains firm at Rmb1.2bn.

We expect more UHV orders to come since tendering typically happensmainly in 2H and may provide a further catalyst for the stock price. 3) Steadymarket share consolidation with Pinggao’s share in State Grid Corp of Chinaand China Southern Grid tendering rising by 0.89pp/3.94pp in 1H16,according to the company. We still expect grid operators’ focus on qualityover price to drive greater market share gain for leaders like Pinggao. 4)New products on track: Tianjin Pinggao, Pinggao’s new product subsidiary,commenced operation and received its first Rmb17mn EV charging pileorder in June 2016. While still incurring a net loss of Rmb35mn in 1H16, weexpect the ramp-up of vacuum interrupter and more EV charging orders tobring it to the break-even level in 2017. 5) Pinggao’s Rmb4.9bn privateplacement plan received approval on July 22, expiring in 6 months.

We raise our 2016E/17E/18E EPS by 7%/9%/8% to factor in a higher GISgross margin and EV charging pile revenue assumptions. Accordingly weraise our 2017E EV/GCI vs. CROCI/WACC-based 12-m TP by 9% to Rmb21.3(cash return multiple still at 1.04x). Trading at 14x 2017E P/E with a 4%2016E div yield and +29% 15-18E EPS CAGR, we maintain CL-Buy.

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