SIFANG(SH:601126) HTSC·2025-06-30 12:47Investment Rating - The report initiates coverage on the company with a "Buy" rating and sets a target price of 20.20 RMB, based on a 20x PE for 2025 [6][8]. Core Views - The company is a leader in the domestic secondary equipment industry for power grids, with a solid technical foundation and stable growth in its core business, while also having the potential to expand its market presence outside the grid [15][21]. - The company has demonstrated a robust revenue growth rate, with a CAGR of 11.8% from 2018 to 2024, significantly outpacing the 1.9% growth rate of grid infrastructure investment [22]. - The report anticipates a continued increase in ROE, which has risen from 4.76% in 2019 to 16.25% in 2024, alongside a consistent dividend yield above 4.2% for the past three years, projected to reach 5.0% in 2025 [4][18]. Summary by Sections Power Grid Sector - The main grid's secondary equipment market is expected to grow at a CAGR of 10.1% from 2024 to 2026, with the company increasing its market share in recent bidding rounds [2][20]. - The company has secured a growing share of the secondary equipment market, with bidding shares of 14.2%, 15.1%, and 16.2% for 2023, 2024, and 2025 respectively [2][31]. Generation Sector - The company maintains a leading position in offshore wind and large-scale renewable energy projects, with a significant order growth of over 40% year-on-year in the renewable sector since 2025 [3][17]. - In traditional energy, the company is actively involved in major projects in thermal, hydro, and nuclear power, expecting steady revenue growth alongside the traditional energy sector [3][17]. Financial Performance - The company’s net profit is projected to reach 845 million RMB, 988 million RMB, and 1.15 billion RMB for 2025, 2026, and 2027 respectively, with an EPS of 1.01 RMB, 1.19 RMB, and 1.38 RMB [6][11]. - The report highlights strong cash flow management and a commitment to shareholder returns, with a dividend payout ratio expected to remain around 80% [4][19]. Market Insights - The report identifies a gap in market understanding regarding the potential of source-grid-load-storage projects, which are crucial for the efficient integration of renewable energy [5][19]. - The company is well-positioned to benefit from the growth of the source-grid-load-storage market due to its comprehensive technical capabilities across the entire industry chain [5][19].