HUAMING(SZ:002270) HTSC·2026-03-06 07:59Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 40.18 [5]. Core Insights - The company has experienced rapid growth in overseas business, particularly in the export of tap changers, which reached RMB 714 million in 2025, a year-on-year increase of 47% [2]. - The maintenance business is also showing strong growth, with revenue growth close to 30% in 2025, and order growth exceeding revenue growth [2]. - The CNC business has made significant strides in overseas markets, with revenue of RMB 244 million in 2025, a 40% increase year-on-year, and overseas revenue growing by 230% [2]. Summary by Sections Overseas Business - The export scale of tap changers reached RMB 714 million in 2025, with direct exports at RMB 367 million (up 34%) and indirect exports at RMB 347 million (up 64%) [2]. - Europe accounts for over half of direct exports, while Asia contributes about 30%, and the Americas and Africa together make up around 20% [2]. Maintenance Business - The maintenance business for on-load tap changers is expected to grow close to 30% in 2025, with order growth outpacing revenue growth [2]. - The maintenance business has a stronger profitability profile, with a gross margin higher than the company's overall margin, which is expected to further enhance overall profitability [2]. CNC Business - The company plans to adjust its equity structure and introduce a new team by the end of 2024, focusing on higher-margin overseas markets [2]. - Revenue from the CNC business is projected to reach RMB 244 million in 2025, with overseas revenue at RMB 112 million (up 230%) and domestic revenue at RMB 132 million [2]. Profitability and Cost Structure - The company's pricing strategy is stable, and the cost structure is diversified, minimizing the impact of any single raw material price increase [3]. - The average gross margin for overseas tap changers is 5-10 percentage points higher than domestic margins, indicating a positive trend in profitability as overseas revenue increases [3]. Capacity and Delivery - Domestic capacity for tap changers is 20,000 units, with additional capacities in Turkey and Indonesia [3]. - The current delivery cycle for overseas tap changers is 2-3 months, with potential for capacity expansion through increased shifts and automation [3]. Financial Forecast and Valuation - The company is expected to benefit from a global upturn in power grid investments, with projected net profits of RMB 879 million, RMB 1.089 billion, and RMB 1.346 billion for 2025, 2026, and 2027 respectively [4]. - The estimated EPS for the same years is projected to be RMB 0.98, RMB 1.22, and RMB 1.50 [4].