Huaming Power Equipment: 1Q26 Revenue Growth by Segment - Power Equipment (Mainly Tap Changers)
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Morgan Stanley notes that Huaming Power Equipment delivered a soft 1Q26, with revenue growing 4% year-over-year while net profit declined 5%. Adjusting for share-based compensation expenses, adjusted net profit actually grew 4%. The weakness primarily stemmed from delivery delays in on-load tap changers, falling below both Morgan Stanley and consensus expectations, which had anticipated roughly 20% full-year earnings growth.
By segment, power equipment revenue—primarily tap changers—dipped 1% due to customer delivery deferrals. Conversely, CNC machine tool revenue surged 53%. This adverse product mix shift dragged the gross margin down 2 percentage points to 53%, as power equipment typically commands gross margins near 60% compared with the low-20% range for CNC machine tools.
Despite this quarter's setback, analysts emphasize that underlying tap changer demand remains robust, driven by accelerating global grid capital expenditure. They expect subsequent quarter delivery catch-ups to drive a solid revenue recovery. Furthermore, an improving product mix should facilitate margin rebound. Consequently, Morgan Stanley maintains its Overweight rating and a target price of RMB 36.30 for the stock.
The target price implies 30.5x one-year forward P/E, corresponding to 37.5x 2026E P/E and a 1.6x PEG ratio, aligning closely with global industry peers. The last closing price stood at RMB 27.59 on April 24, 2026.