HUAMING(SZ:002270)2025-11-24 01:46Investment Rating - The report assigns an "Overweight" rating to Huaming Equipment with a price target of Rmb33.00 for December 2026 [3][7]. Core Insights - Huaming Equipment is the largest manufacturer of tap changers for transformers in China, holding a market share of over 60% and gradually gaining market share globally. The company is expected to benefit from the increasing global demand for transformers due to its cost advantages and strong brand recognition [7]. - The company has seen a pick-up in sales in the US market, particularly from transformer manufacturers in Korea and Brazil, as well as data centers. However, management anticipates limited near-term earnings contributions from this market [4][5]. - Huaming's shorter lead times for product delivery (less than 3 months) compared to competitors (3-6 months) are a key factor driving its overseas growth [4][5]. Summary by Sections Overseas Market Opportunities - Huaming Equipment is exploring a potential major contract for transformer supply in Saudi Arabia, which could exceed Rmb10 billion. This contract may require over 50% of components to be locally manufactured, prompting Huaming to consider establishing an assembly plant in Saudi Arabia [4][5]. - The company has increased its sales in the US market, with a focus on data centers and power plants, although management notes that immediate earnings contributions will be limited [4][5]. Domestic Market Performance - Domestic growth remains modest, with management expressing caution due to weak demand from non-grid customers. Huaming's market share in domestic sales volume is already over 80% (excluding UHV) [5][7]. - The company is optimistic about growth opportunities in high-voltage products (>500kV) and has supplied tap changers for a UHV line that became operational earlier this year [5]. Valuation - The price target of Rmb33.00 per share is based on a target P/E ratio of approximately 28x, reflecting a 7.8x 2026E P/B and a yield of 1.8%. This valuation is consistent with the average of regional transformer companies, indicating a stronger outlook for Huaming's overseas growth [8].