Recently, stock prices in the secondary market have continued to rise, spurred by news that the majority shareholder's shareholder's shareholding has switched to Xi'an Electric Power Machinery Manufacturing Company. We share our views on what might be expected in the future. Stock business profitability The existing business of a company is generally to produce major products such as vacuum arc extinguishers, vacuum circuit breakers, switch cabinets, etc. The voltage grade includes 0.22KV to 45KV series products, which are a series of low-voltage products in power equipment. Revenue of 343.67 million yuan was achieved in the first three quarters of 2008, an increase of 32% over the previous year. Net profit was 5.1 million yuan. Although the year-on-year increase reached 67%, the net sales interest rate was only 1.5%, making the financial content of the performance increase insufficient. If you do a segmented study, the gross margin is 23%, which is average for the industry. The main reason for the net sales margin of only 1.5% is that management capacity is weak. The expense ratio reached 21.5% during the period, which basically swallowed up the gross profit margin. The strong strength of the new shareholders became the reason for expectations. The majority shareholder of the company is Shaanxi Baoguang Group, which is controlled by the State Assets Administration Commission. The Baoji Municipal State-owned Assets Administration Commission, the actual controller of Baoguang Group, signed the “State-owned Property Transfer Agreement” with Xi'an Electric Power Machinery Manufacturing Company on January 16, 2009. The agreement stipulated that the Municipal State-owned Assets Administration Commission transferred 92% of Baoguang Group's shares to Xidian without charge. As a result, the actual controller of Baoguang Co., Ltd. was changed from the Municipal State-owned Assets Administration Commission to Xidian. Established in 1959, Xidian Group is the main base for scientific research, production and testing of complete high voltage and ultra-high voltage AC/DC transmission and transformation equipment in China. The Group's main units include 9 key manufacturers of power transmission and transformation equipment and other electrical products, 3 national industry research institutes, 3 specialized companies undertaking international engineering, domestic sales, finance, etc., and 6 Sino-foreign joint ventures, with total assets of 8.510 billion yuan. According to public information, Xi'an Electric Power Machinery Manufacturing Company achieved main revenue of 10.68 billion yuan in 2007. In 2008, main revenue increased 27.5% year-on-year to 13.6 billion yuan. Looking at the competitive advantages of subsidiaries, the sales revenue of the four companies, Xidian High Voltage Switch, Xiden Capacitor, and XPEN High Voltage Electric Porcelain, are all at the top three levels in the industry. Among them, Western Electric High Voltage Switches are comparable to Pinggao Electric. Xidian Transformers are smaller in scale than Tianwei Baobian and TBEA, but the technology is basically at the same level. Due to the lack of publicly available complete data, we estimate the net profit of Xi'an Electric Power Machinery Manufacturing Company based on the profit level of Pinggao Electric and Tianwei Baobian, which is also a state-owned enterprise. After deducting the investment income portion, the net sales interest rates of Pinggao Electric and Tianwei Baobian are 6% and 10%, respectively. Using an average of 8% as the basis for conversion, the estimated net profit of Xi'an Electric Power Machinery Manufacturing Company was 1.1 billion yuan in 2008, and the net profit forecast for 2009 was 1.35 billion yuan based on 25% growth. A relatively ideal but not overly optimistic capital operation trajectory, the company's total assets are 8.510 billion yuan. According to the 2008 revenue of TBEC and net assets of 5 billion yuan, the net assets of Xi'an Electric Power Machinery Manufacturing Company are calculated at 6 billion yuan, and the corresponding balance ratio is 30%, which is clearly more cautious. We calculated a revaluation value of 12 billion on the basis of 2 PB. Although it is difficult for us to judge the specific process, it is certain that if there is an opportunity for backdoor listing, the secondary market will respond positively. We calculated 20 yuan as the additional issue price. The total asset injection would require an increase of 600 million in share capital. In addition to the current share capital, it should not exceed 800 million yuan. Based on the previous calculation of net profit of $1.35 billion in 2009, the corresponding EPS was 1.70 yuan. Converted to 20 times PE, the corresponding stock price is 35 yuan, an increase of nearly 3 times compared to the current stock price. No ratings yet. Through the previous analysis, the huge size difference between Xi'an Electric Power Machinery Manufacturing Company and current Baoguang Co., Ltd. is the main reason for market expectations. According to our ideal, but not optimistic, assumptions, there is huge room for stock prices in the market. Due to many uncertainties, we are not giving ratings yet.