Times Electric(688187)2024-10-31 08:11Investment Rating - The report maintains a "Buy" rating for the company with a target price of CNY 53.4, indicating a potential upside of 11% from the current price of CNY 48.3 [1][8]. Core Views - The company achieved a net profit growth of 11% year-on-year and 6% quarter-on-quarter in Q3, demonstrating stable business growth. The gross margin was recorded at 32.6%, a year-on-year decline of 1.9 percentage points but an increase of 8.6 percentage points quarter-on-quarter. The fluctuation in gross margin is attributed to accounting standard changes, while the operational gross margin remains relatively stable [1][2]. - The rail transit business is expected to continue its recovery, benefiting from increased demand due to major repairs. The expansion of IGBT capacity in Yixing is a solid foundation for the growth of the power semiconductor business. The current P/E ratios for the company's Hong Kong and A-shares are 9.6x and 16.4x, respectively, indicating attractive valuations [1][2]. Revenue and Profitability - In Q3, the company's revenue reached CNY 5,973 million, an 8% increase year-on-year but a 6% decrease quarter-on-quarter. The gross profit was CNY 1,945 million, reflecting a 2% year-on-year increase and a 27% quarter-on-quarter increase. The operating profit was CNY 994 million, up 15% year-on-year and 20% quarter-on-quarter [13][14]. - The emerging equipment segment generated revenue of CNY 2,661 million in Q3, a 14% year-on-year increase, with the power semiconductor revenue reaching CNY 9.65 billion, growing 27% year-on-year. The revenue from the new energy vehicle main drive segment surged by 67% year-on-year [2][15]. Financial Forecasts - The revenue forecast for the company is projected to grow from CNY 18,034 million in 2022 to CNY 31,956 million by 2026, with a compound annual growth rate (CAGR) of approximately 14%. The net profit is expected to increase from CNY 2,556 million in 2022 to CNY 3,853 million in 2026, with a slight decline in growth rate in the later years [3][10]. - The gross margin is anticipated to fluctuate, with estimates of 32.7% in 2022, peaking at 33.9% in 2023, and then stabilizing around 31.7% by 2026 [3][10]. Market Position and Valuation - The company holds a significant market share in the power semiconductor and new energy vehicle sectors, with the latter showing robust growth despite pricing pressures. The rail transit business contributes significantly to the overall revenue, accounting for 55.2% of total revenue in Q3 [2][15]. - The target P/E ratios for A-shares and Hong Kong shares are projected to decline from 29.6x in 2022 to 19.6x by 2026, indicating a potential for value appreciation as earnings grow [3][10].