Main points of investment:
Today, Baoman Electric arrived at our recommended target price of 12 yuan for the first stage, and we raised the target price for the second stage to 16 yuan to maintain buying.
First of all, reiterate the recommendation logic to the company: 1. UHV, nuclear power, Belt and Road Initiative flexible target, large room for performance improvement; 2. The input cost of major shareholders is close to the current market value, and there is a large market capitalization space in the future from the point of view of maintaining and increasing the value of state-owned assets. The reform of central enterprises and state-owned enterprises has been carried out in an all-round way, and the company is expected to try out many reform measures to comprehensively improve performance and employee enthusiasm; 4. There are many catalysts during the year: Belt and Road Initiative is expected to have multiple advantages at the opening of the Boao Forum for Asia, bidding for the start of nuclear power plants, bidding for UHV approval in the second quarter, follow-up asset injection, promulgation of a number of measures for the reform of state-owned enterprises, quarterly performance growth exceeding expectations, and so on.
We believe that the trend of Baomeng's share price this year will continue to hit new highs in the verification of the above logic one by one, benefiting from the recent multiple positives of Belt and Road Initiative, the company has reached the target price in the first stage.
Belt and Road Initiative as a national strategy will also continue to catalyze the company's stock price rise, large strategy and small companies, to ensure that the future performance will continue to improve. First of all, as China's national strategy to benefit neighboring countries and the people of the world at the same time, Belt and Road Initiative is supported by more and more countries, and infrastructure exports must be matched with electric power, especially transformers. We are optimistic about the key role that domestic UHV transformer enterprises will play in this national strategy. Baoshan Electric has directly set up a plant in India to increase its investment layout. Setting up a factory directly can bypass high tariff barriers to exports and benefit India's current strong electricity demand. Future Indian orders are not taken into account in our previous profit forecasts, and export orders from other countries are expected to continue to recover in the next three years. It is also not taken into account in our profit forecast.
Secondly, the tender for new transformers for nuclear power plants will also resume during the year, and the income from new nuclear power transformer orders, especially the elasticity of profits, is very considerable. Considering that nuclear power is not only China's domestic energy strategy, but also an important part of China's international energy strategy, we expect that the company's transformers will also go to sea with Hualong-1 and receive considerable overseas orders. these were not taken into account in previous earnings forecasts.
In the third quarter, domestic UHV bidding is about to begin in the second quarter, and we expect the company's share to recover forcefully. We expect the company to accumulate about 2.5 billion of UHV line orders in 2015. Based on our neutral industry bidding judgment of "2 exchanges and 3 direct lines", the subsequent approval of lines in the industry will also lead to higher-than-expected orders, and there is room for upward adjustment in previous profit forecasts.
Finally, the greater flexibility of the company's profits in the next two years will also come from the huge improvements in the cost side and the investment income side. At present, it is difficult for us to accurately estimate the strength of the company to reduce costs and increase efficiency. However, considering the great determination of the company's major shareholders, the great pressure of management change, and the clear arrangement of the business strategy for reducing costs and efficiency, we believe that in the future, the company's efforts to reduce costs and increase efficiency will also cause us to raise our profit forecast judgment.
Finally, the company's promised asset injection was not included in our previous earnings forecasts.
To sum up, as the future revenue side and cost side still have greater flexibility that is currently unpredictable, we suggest that investors make expectations for this and maintain their previous profit forecasts for the time being, with expected results of 0.26,0.40 yuan for 2015-16, respectively. Raise the target price to 16 yuan and maintain the buy rating.
