Company Profile

HENAN PINGGAO ELECTRIC CO., LTD. is a China-based company, principally engaged in the manufacture and distribution of electric power transmission and conversion equipment. The Company's main products include enclosed combined electrical equipment, circuit breakers (CBs), isolating switches and earthing switches, open combined electrical equipment, vacuum circuit breakers, complete set of electrical equipment and instrument transformers, among others. The Company distributes its products within domestic market and to overseas markets.(Source:Reuters)

Event

HENAN PINGGAO ELECTRIC CO., LTD. (“PINGGAO”/ the company) announced its third-quarter financial results of 2023.

In the first three quarters of 2023, the company reported revenue/ net income attributable to shareholders at CNY 7.447 billion/ CNY 552 million, a year-on-year increase of 21.5%/ 209.8%, with Q3 seeing CNY 2.622 billion /CNY 219 million, 24.2%/ 256.8% higher than it was a year ago. The performance was in line with its earlier forecast report.

Comments

The company continuously stepped up efforts in market expansion and continued to deepen its reforms on quality and efficiency improvements.

Upholding the principle of “Customer First, All Staff Marketers”, the company continued to optimize its marketing system on two-step flow, making its performance realize high growth and contract structure further better.

The market share of items winning the bidding of State Grid Corporation of China continued to take the lead.

Meanwhile, the company put quality and efficiency improvements at an outstanding place, and its management efficiency fully played its role.

In the reporting period, the company reported gross margin at 21.4% and net margin at 9.1%, showing the rapid growth in its profitability.

Its power distribution business and global business showed a marginal turnaround.

The profitability of its power distribution business improved steadily, and it continued to deepen improvements such as enhancing its product design, conducting intelligent reforms, and furthering integration of primary equipment and secondary equipment.

Its global business, focusing on EPC, has been recognized across the globe, and becomes better.

As innovation drives growth, the company’s R&D capabilities improve　continuously.

It has built a science and technology R&D system concerning switchgears for AC and DC, entire series, and entire voltage levels.

Over the years, PINGGAO has achieved breakthroughs in key technological fields on high-voltage, ultra-high-voltage, extra-high-voltage equipment.

PINGGAO boasts stronger competitive edges in brands, and the function of its main products has reached global leading levels and the quality of its products has taken the lead in China.

As the demand for external delivery of wind power and photoelectricity bases still exists, the prosperity of extra-high-voltage is still there.

The construction of extra high voltage continued to be realized this year, with the implementation of “two AC and four DC lines” in line with expectations, and multiple lines during “the 14th Five-Year Plan” being promoted in an orderly manner. The number of starts in 2024 expected to continue a good momentum.

Looking ahead, as the demand for external delivery still exists, the growth certainty of the industry is of no doubts.

Earnings forecast and investment recommendation

As a leading player of high-voltage switches in China, PINGGAO boasts comprehensive products and strong technological innovation capabilities.

The investments in extra-high-voltage equipment will embrace a new wave of cycle, and the company will fully benefit from the industry growth.

As the company’s profitability since this year has continued to improve, we revised up our EPS forecasts to CNY 0.53 in 2023, CNY 0.75 in 2024, and CNY 0.89 in 2025, implying a P/E ratio to 20.7x, 14.6x, and 12.3x, respectively, based on the closing price on October 17. Maintain “Outperform”.

Potential risks

weaker-than-expected policy effects; less-than-expected downstream demand; continuous price hikes of raw materials; macroeconomic volatility