HSBC | Hua Ming Equipment (002270 CH): Buy — the Pullback Offers a Good Entry Point
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HSBC Qianhai maintains Buy on Hua Ming Equipment (002270 CH), cutting its DCF-based target price from RMB43.00 to RMB42.20 — still 132% above the September 16, 2026 close of RMB18.21. The stock's 27% year-to-date pullback (CSI 300: -3%) followed President Trump's August 26 signing of Executive Order 14421, banning imports of foreign bulk-power equipment deemed security risks. HSBC sees limited impact: the US contributed under 2% of 2025 revenue, and with MR and Hua Ming holding a combined 68% of the 2025 global tap-changer market amid persistent transformer shortages, a single-market restriction is unlikely to reshape the industry. The shares imply a 4.4% 2027e dividend yield.
HSBC forecasts a 15% 2025-28e earnings CAGR, driven by rising global grid capex and overseas share climbing from 6% in 2025 to 12% by 2030e. It trimmed 2026-28e earnings by 2-4% and power-equipment sales by 2-3% on weak non-grid demand (1H26 solar installations -66% YoY; manufacturing FAI -1%), though July solar installs rose 47% YoY, signaling a bottom. 1H26 revenue was RMB1.28bn (+14% YoY), recurring net profit RMB425m (+15%; roughly 20% excluding a RMB21m FX loss), and power-equipment gross margin rose 0.4ppt to 60.8%. Key DCF assumptions: 8.1% cost of equity, 9% 2024-37e operating-cash-flow CAGR (previously 10%), and 2.5% terminal growth. Risks include weaker transformer demand and slower overseas expansion.
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