HUAMING(SZ:002270) Guoyuan Securities·2024-02-01 16:00Investment Rating - The report maintains a "Buy" rating for the company Huaming Equipment (002270.SZ) [1] Core Views - Huaming Equipment is a leading enterprise in transformer tap switches, focusing on three main business segments centered around electrical equipment. The company has shown steady growth, with a revenue of 1.712 billion yuan in 2022, representing a year-over-year increase of 11.7%. The net profit attributable to shareholders is expected to reach between 533 million and 560 million yuan in 2023, indicating a growth of 48.3% to 55.8% [2][3][24]. Summary by Sections Business Overview - Huaming Equipment has been deeply engaged in the transformer tap switch sector for 30 years and has established a leading position in the industry. The company acquired its main competitor, Changzheng Electric, in 2018, forming two major production bases and securing the top domestic and second global market share in tap switches [20][30]. Market Dynamics - The domestic market is experiencing an upturn in grid investment, which is expected to drive demand for transformers and their core components, including tap switches. The overseas market is also benefiting from accelerated grid investments, providing a broad outlook for the company's electrical equipment exports. The company is actively planning local operations abroad to capture market share from competitors [2][3][32]. Financial Forecast and Investment Rating - The company is projected to achieve net profits of 540 million, 660 million, and 830 million yuan for the years 2023, 2024, and 2025, respectively, with year-over-year growth rates of 50.5%, 22.0%, and 26.4%. The corresponding price-to-earnings ratios for these years are expected to be 23.6, 19.4, and 15.3, which are below the average of comparable companies, justifying the "Buy" rating [3][58]. Revenue and Profitability - The company’s revenue is expected to reach 2.146 billion, 2.642 billion, and 3.171 billion yuan for 2023, 2024, and 2025, respectively, with year-over-year growth rates of 25.4%, 23.1%, and 20.0%. The gross profit margins are projected to be 52.3%, 53.0%, and 53.4% for the same years [11][57]. Product and Service Expansion - Huaming Equipment is expanding its service offerings in maintenance and repair, leveraging its existing customer base of over 160,000 sold tap switches. The company is also focusing on high-barrier research and development for ultra-high voltage products, aiming to break the monopoly of foreign brands in this sector [3][54][81].