HUAMING(SZ:002270)2026-01-23 15:35Summary of Huaming Power Equipment (002270.SZ) Conference Call Company Overview - Company: Huaming Power Equipment - Ticker: 002270.SZ - Industry: Power Grid Equipment Key Financial Highlights - 2025 Preliminary Results: - Net profit increased by 15.3% year-over-year (yoy) to Rmb 708 million - 4Q25 net profit rose by 5.6% yoy to Rmb 127 million - Adjusted net profit (excluding employee incentive scheme) increased by 21.5% yoy to Rmb 746 million in 2025, with 26.1% growth in 4Q25 to Rmb 152 million - Recurrent net profit grew by 22.7% yoy to Rmb 714 million in 2025, with 23.4% growth in 4Q25 to Rmb 135 million - Results exceeded consensus estimates by 2-3% [1][2][3] Revenue Breakdown - Tap Changer Revenue: - Total revenue from tap changers increased by 16% yoy to Rmb 2,100 million in 2025 - Overseas sales accounted for 34% of tap changer revenue, totaling Rmb 713 million (+47% yoy) - Domestic sales made up 66%, totaling Rmb 1,387 million (+5% yoy) - 4Q25 tap changer revenue rose by 14% yoy to Rmb 565 million, with overseas sales up 50% yoy to Rmb 227 million [2][11] Margin and Cost Analysis - Net Margin: Expanded by 1.5 percentage points yoy to 20.9% in 4Q25 due to increased overseas sales and reduced electrical engineering sales - CNC Machines Revenue: Increased by 40% yoy to Rmb 244 million, with export revenue surging by 233% yoy - Electrical Engineering Revenue: Declined by 90% yoy to Rmb 29 million as the company downsizes this low-margin segment [2][3] Market and Industry Insights - State Grid Capex: - State Grid plans to increase its capital expenditure to Rmb 4 trillion for the 15th five-year period (2026-2030), which is 40% higher than the previous period - This growth is expected to exceed the overall PRC power grid capex growth of 5.9% yoy [4][8] - Domestic Revenue Contribution: Huaming's domestic grid-related revenue accounted for 30% of its total tap changer revenue in 2025 [8] Investment Outlook - Rating: Buy - Target Price: Rmb 29.00/share, based on a DCF model with a terminal growth rate of 4.0% - Expected Share Price Return: -9.2% with a dividend yield of 1.8% - Market Capitalization: Rmb 28,616 million (approximately US$ 4,109 million) [6][9][13] Risks - Key risks include: - Lower-than-expected overseas new orders - Lower-than-expected China grid capex - Higher-than-expected raw material costs [14] Conclusion - Huaming Power Equipment shows strong financial performance with significant growth in overseas sales and improved margins. The positive outlook from State Grid's increased capex and the company's strategic focus on high-margin products position it well for future growth. However, potential risks related to market conditions and operational costs should be monitored closely.