China XD(SH:601179) Minsheng Securities·2024-10-14 08:03Investment Rating - The report initiates coverage with a "Buy" rating for the company [2]. Core Views - The company is a leading enterprise in the power transmission and distribution equipment sector, benefiting from the ongoing infrastructure cycle in the power grid [2]. - The company has shown significant improvement in profitability, with gross margin rising to 19.83% and net margin to 5.59% in Q2 2024 [2]. - The company is well-positioned to capitalize on the growth in both domestic and international markets, particularly in the context of increasing clean energy investments and the global push for energy transition [2]. Summary by Sections 1. Company Overview - The company has a long-standing presence in the power transmission and distribution equipment industry, focusing on high-voltage switches, transformers, and DC transmission converters [8]. - It has established a strong market position in the ultra-high voltage sector and is expanding its international footprint, including projects in Turkey and various countries in Africa [2][10]. 2. Financial Performance - The company has experienced steady revenue growth, with total revenue increasing from 13.91 billion yuan in 2018 to 21.05 billion yuan in 2023, representing a CAGR of 8.6% [16]. - The forecast for revenue from 2024 to 2026 is 24.896 billion yuan, 29.038 billion yuan, and 33.562 billion yuan, with growth rates of 18.3%, 16.6%, and 15.6% respectively [3]. 3. Market Demand and Growth - The domestic market is witnessing a wave of ultra-high voltage construction, with significant growth in new contracts signed by the company [25]. - Internationally, the company has seen a doubling of new contracts in equipment exports in 2023, indicating strong demand for its products [2][32]. 4. Investment Recommendations - The report suggests that the company will continue to maintain its leading market share in the domestic power grid sector while expanding into emerging sectors such as smart grids and renewable energy [2]. - The projected earnings per share for 2024, 2025, and 2026 are 0.25 yuan, 0.39 yuan, and 0.46 yuan, respectively, with corresponding PE ratios of 32X, 21X, and 17X [3].