HUAMING(SZ:002270) Tianfeng Securities·2024-05-03 10:06Investment Rating - The report initiates coverage with a "Buy" rating for the company, setting a target price of 22.6 CNY based on a DCF model with a WACC of 10.19% and a perpetual growth rate of 2% [13][14]. Core Insights - The company is a leading player in the domestic transformer tap changer market, actively expanding into overseas markets. It has established a strong position in the high-voltage segment and is expected to benefit from the increasing demand for ultra-high voltage equipment and international market expansion [19][62]. - The company has shown robust revenue growth, with a CAGR of 13.15% from 2021 to 2023, and a significant acceleration in growth in 2023, achieving a revenue of 1.962 billion CNY, a year-on-year increase of 14.63% [19][72]. - The company’s main business segments include power equipment, power engineering, and CNC equipment, with power equipment being the primary revenue contributor [69][84]. Business Structure - The company operates in three main segments: 1. Power Equipment: Focused on the research, production, and sales of transformer tap changers and other power transmission and transformation equipment [69][48]. 2. Power Engineering: Engaged in the contracting, design, construction, and operation of renewable energy power stations, benefiting from the increasing installation of wind and solar power [70][19]. 3. CNC Equipment: Involves the development and manufacturing of integrated CNC processing equipment, with a production capacity of 1,000 specialized CNC machine tools annually [12][69]. Financial Performance - The company’s revenue is projected to reach 2.384 billion CNY in 2024, with a year-on-year growth of 21.58%, and net profit is expected to be 708 million CNY, reflecting a growth of 30.59% [13][34]. - The gross margin has improved significantly, reaching 52.21% in 2023, up 2.91 percentage points from 2022, driven by operational efficiencies and product upgrades [56][84]. - The company’s net profit for 2023 was 542 million CNY, with a net profit margin of 28.07%, indicating strong profitability [82][84]. Market Position - The company holds a dominant position in the domestic market for transformer tap changers, with a market share exceeding 90% in the 110kV and above segment, and has effectively replaced imports in the 220kV and below segment [62][64]. - The company has successfully expanded its overseas market share, with international revenue increasing from 10.61% in 2018 to 13.98% in 2023, indicating a growing presence in regions such as Southeast Asia, Europe, and the United States [19][75].