HHI(SH:601226) SINOLINK SECURITIES·2024-05-17 08:30Investment Rating - The report assigns a target price of RMB 7.07, with the current market price at RMB 5.84, indicating a potential upside [1]. Core Views - The company is positioned to benefit from the dual development of traditional and renewable energy, leveraging the energy transition trend [3]. - A new investment cycle in thermal power presents opportunities for the company's traditional business [4]. - The company is backed by Huadian Group, which solidifies its advantages in thermal engineering and material handling businesses [5]. - The company is expanding its hydrogen energy business with an integrated approach to production, storage, and utilization [7]. Summary by Sections Financial Performance - Revenue (in million RMB) is projected to decline from 8,206 in 2022 to 7,174 in 2023, before rebounding to 8,664 in 2024, with a growth rate of 20.75% [2]. - Net profit attributable to shareholders is expected to drop significantly from 310 in 2022 to 98 in 2023, but is forecasted to recover to 275 in 2024, reflecting a growth rate of 181.89% [2]. - The diluted earnings per share (EPS) is projected to decrease from 0.265 in 2022 to 0.084 in 2023, then recover to 0.236 in 2024 [2]. - The company’s return on equity (ROE) is expected to decline from 7.37% in 2022 to 2.33% in 2023, with a recovery to 6.38% in 2024 [2]. Business Segments - The company is actively involved in both traditional and renewable energy sectors, with significant contributions from thermal power, wind, solar, and hydrogen energy [60]. - The thermal engineering business is experiencing a resurgence due to increased demand for auxiliary systems in new thermal power projects [69]. - The material handling business is focusing on domestic and international markets, leveraging opportunities from the Belt and Road Initiative [81]. - The wind power segment is expected to see accelerated installation rates, particularly in offshore wind projects, with a projected CAGR of 78% for offshore wind installations [106]. Market Dynamics - The report highlights a robust demand for electricity, with national power generation growth rates of 9.8%, 3.8%, and 6.8% from 2021 to 2023, indicating a favorable environment for the company's operations [53]. - The company is well-positioned to capitalize on the increasing investment in large-scale power generation projects, benefiting from the high industry prosperity [53]. - The hydrogen energy sector is emerging as a significant growth area, with the company’s projects expected to contribute to revenue starting in 2023 [60].