UBS: Nanjing D&Well — Deepsea O&G and Gas Turbine Forging Leader; Over 4x Profit Growth Expected; Buy
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UBS initiates coverage on Nanjing D&Well (688377.SS) with a Buy rating and a DCF-based target price of CNY 51.00, implying upside from the current price of CNY 41.00 as of January 20. The company is a leading forging manufacturer supplying critical alloy components for deepsea oil and gas subsea production systems (SPS), with significant expansion potential into gas turbine applications.
UBS projects a 2025-30E sales CAGR of 19% and EPS CAGR of 31%, driving more than a fourfold increase in net profit. The bank's oil and gas team forecasts global deepsea capex reaching USD 272 billion by 2028, growing at a 7% CAGR through 2024-28. The SPS pressure vessel component TAM is expected to expand from CNY 8 billion in 2024 to CNY 10 billion in 2028, while the gas turbine rotating component TAM grows from CNY 16 billion to CNY 22 billion, driven by AI data center demand.
D&Well held only a 5% share of the global SPS component market in 2024, but UBS expects this to reach approximately 26% by 2030 as the company captures business from European competitors like the FOMAS Group. Key customer TechnipFMC, the SPS market leader with over 50% share, has seen its deepsea order backlog surge 146% from USD 6.5 billion in 2021 to USD 16 billion by the third quarter of 2025. D&Well's own deepsea backlog grew 80% year-on-year in the first three quarters of 2025, with a book-to-bill ratio exceeding 1.6x. At 38x 2026E earnings with a PEG of 0.7x—versus a peer average of 1.4x—the stock offers compelling value.