Investment highlights
For the first time, Mingyang Electric (301291) was covered to give it an outperforming industry rating. The target price was 52.90 yuan, which corresponds to 20.0x P/E in 2025 based on comparable company valuation methods. The company is a leader in wind and solar storage transformers and switching equipment. We are optimistic that the company will continue to drive performance growth with its leading competitive strength. The reasons are as follows:
New energy+new infrastructure circuit core substation equipment manufacturers are fully benefiting from downstream growth dividends. 1) New energy: The global energy transformation is accelerating, and the incremental demand for a boost from new energy connected to the power grid is driving the rapid start-up of the new energy transformer market. We expect the global market space to exceed 60 billion yuan in 2025. Currently, about 80% of the company's revenue comes from new energy. It has been steadily winning framework tenders for large power generation groups for many years, and its market share is at the top. 2) New infrastructure: We believe that demand for data center power supply and distribution systems is strong, and the company's new product orders are expected to grow rapidly; in addition, national distribution network investment is expected to bottom out and rebound, and the company's steady bid for the Southern Grid distribution network equipment framework is expected to benefit.
The domestic sea wind bidding boom is improving, and the company's in-depth layout of the offshore scene has a first-mover advantage. The number of tenders for domestic seabreeze projects increased year-on-year this year. We think next year is expected to usher in a big year of installation, and corresponding transformer orders are expected to accelerate. Sea Wind transformers have high technical barriers. Currently, they are still dominated by international brands, there is a trend of domestic substitution, and the gross margin of Sea Wind products is significantly higher than in other fields. The company started R&D earlier and the product line layout was improved. We are optimistic that with leading product technology, fast response capacity, and core advantages such as deep binding to leading machine manufacturers, as well as new businesses such as offshore secondary booster stations and Haiguang, the offshore sector's business will rapidly expand, and its market share will increase, and high-margin orders are expected to contribute to performance flexibility.
Demand for overseas power equipment is strong, and the company is speeding up the launch of its own brands and building another growth pole.
The installed capacity of generators and electricity consumption have both increased, and investment in global power grids has accelerated. We are optimistic that the long-term boom will continue. Currently, the company mainly participates in the international market using the “indirect overseas market+global layout” model, and its products are used in more than 40 countries including Southeast Asia, Europe, the Middle East, and North America. We are optimistic that its own brand will gradually be established, direct sales orders will gradually be implemented, and overseas business will become another growth pole for the company.
What is our biggest difference from the market?
The market believes that the company's growth mainly depends on the growth of downstream wind storage equipment, and is concerned that the decline in terminal installations in the short to medium term will affect the company's performance. We believe that the company has core advantages such as product performance and customer channels, and is expected to reap flexible performance by increasing its prosperous and high-margin offshore scene and overseas business.
Profit forecasting and valuation
We expect the company's 2024/2025 EPS to be 2.10/2.64 yuan, respectively, and a CAGR of 26%. The current stock price corresponds to 2024/2025 19.6x/15.5x P/E. For the first time, the “outperforming industry” rating was covered. The P/E valuation was used to give the company a target P/E of 20.0x in 2025, with a target price of 52.9 yuan, with 28.7% room for growth compared to the current stock price.
risks
Fluctuating raw material prices; new energy installations falling short of expectations; risk of changes in international trade policies.