\u3000\u3000 Huaming Power Equipment Co.Ltd(002270) (002270)
Tap changer is one of the best links in the field of power equipment, and the leading position of the company is significant. Tap changer is an indispensable and important part of transformer. It belongs to the “small and fine” link in the power equipment industry. The industry has high barriers to entry and a stable market pattern. The company has been deeply engaged in the tap changer industry for decades and has deep barriers to competition. After the acquisition of Changzheng electric in 2019, the market share of on load tap changer for transformers above 35kV in China exceeded 90% (according to the number of sold units), and the gross profit margin of products remained above 55% for a long time.
The construction of new power system drives the growth center of tap changer demand to move up, and the company benefits fully as an industry leader. 1) Power generation side: the transformation of new energy is accelerated, China’s wind power and photovoltaic installation space is fully opened, and large new energy stations need to be equipped with step-up transformers. It is expected that the demand for new energy grid connection will become an important structural increment in China’s tap changer Market in the future; 2) Power grid side: during the 14th Five Year Plan period, China’s power grid investment is expected to rise steadily, and UHV construction and transformer energy-saving transformation are expected to become important factors driving the demand for tap changers; 3) Power consumption side: under the background of dual carbon, the substitution of terminal electric energy is accelerated, and the electrification transformation on the user side is expected to drive the demand of relevant transformers and tap changers.
The company has focused on the three directions of UHV, overseas market and maintenance service, and its performance has accelerated upward. 1) UHV: at present, the tap changer of transformer above 500kV is mainly dominated by foreign-funded manufacturers such as German MR and abb, and the “neck sticking” phenomenon still exists. The company has made a certain breakthrough in the field of UHV, and is expected to realize import substitution in the future; 2) Overseas market: the company’s products have strong cost performance advantages over foreign manufacturers. At present, the company has set up subsidiaries in Russia, Turkey, Brazil and the United States. With the improvement of overseas layout, the company’s overseas market share will have great room to improve in the future; 3) Maintenance service: the maintenance of tap changer is just needed by the industry. According to the disclosure in the annual report, at present, the company operates more than 160000 tap changers in the network. From 2019, the maintenance service revenue will increase rapidly, and it is expected to contribute a large performance increment in the future.
Investment suggestion: the demand of the tap changer industry is rising, and the company’s leading position in China is stable. We expect the company to achieve operating revenue of RMB 1.482/1.719/2 billion and net profit attributable to the parent company of RMB 425/3.23/403 million respectively from 2021 to 2023. After deducting non recurring profits and losses, the performance will improve steadily (the company’s sale of Brazilian power projects in 2021 will generate large income from changes in fair value). For the first time, “Buy-A” investment rating is given, and the six-month target price is 11.00 yuan, corresponding to 26 times of 2022 P / E.
Risk warning: power investment is less than expected, and overseas market expansion is less than expected
