Investment Rating - The report assigns an "Overweight" (OW) rating to Huaming Equipment with a price target of Rmb19.00 by December 2025 [3][19]. Core Insights - Huaming Equipment is recognized as an under-appreciated player in the global transformer market, currently trading at a valuation discount of over 10% compared to peers [2][4]. - The company has a strong market position with over 60% market share in tap changers for transformers in China and has made gradual gains globally, achieving over 15% market share [19]. - The report highlights the favorable competitive landscape for Huaming, with only two major overseas competitors and a gross margin exceeding 60% [4][19]. - Continued strength in transformer demand and positive export data from Asia are expected to bolster investor confidence in Huaming's overseas momentum [4][19]. Summary by Sections Recent Performance - Huaming has outperformed its peers and the index by over 10% in the past month, while peers have averaged a decline of 1% [2][4]. - The report notes that the earnings cutting cycle is likely over, supported by strong first-quarter results and the announcement of a share incentive scheme [4]. Market Dynamics - The transformer market is experiencing a supply tightness, benefiting companies like Huaming, which is positioned to capitalize on this trend [4]. - The report anticipates that Huaming's overseas revenue growth will accelerate, particularly with high voltage transformer capacity expansion expected to begin in 2026 [4][19]. Valuation - The price target of Rmb19.00 is based on a 21x 2025E-26E P/E ratio, which aligns with the average valuation of regional transformer companies [20]. - The report emphasizes that Huaming's valuation discount to peers is unjustified given its growth prospects and market position [4][19].