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China XD Alert:Key takeaways from dbAccess China Industrial Corporate Day

发布时间:2015-11-04    研究机构:德意志银行

China XD attended the dbAccess China Industrial Corporate Day and weprovided key takeaways as below. Despite a 14% yoy profit decline in 9M15dragged by 3Q due to delivery schedule, management is still confident toachieve a bottom line growth for full-year 2015 with a UHV delivery catch-upin 4Q. They also expect two more UHV DC line approval/tender this November,which may bring total UHV order intake in 2015 to c.Rmb7bn. 2016 may comeas a year of stronger growth in UHV and overseas business backed by higherorder backlog, though regular voltage products suffer demand headwinds.

Key takeaways from Industrial Corporate Dayn

UHV orders and delivery: China XD has secured orders of Rmb5.2bn from4 UHV tenders YTD. It expects at least another Rmb2bn to come from twoUHV DC lines connecting Inner Mongolia with Shandong and Jiangsu,which are likely to get approval and open for tenders this November.On the delivery side, management advises UHV revenue recognition atc.Rmb3-4bn in 2015, with c.Rmb1.3bn to be booked in 4Q (mostlyassociated with CSG’s DC projects tendered in 2013). On an estimatedRmb9-10bn of UHV order backlog by end-15 (incl. Rmb2.3bn received lastDecember and likely >Rmb7bn in 2015), management looks to recognizeover 30% growth in UHV revenue in 2016.

Regular voltage products: Per management, China XD’s regular voltageproducts are faced with demand headwinds given c.40% of the sales arecontributed by non-grid industrial customers, whose power consumptionis slowing down amid weak production utilization.

GPM outlook: China XD attributed the GPM improvement in 9M15 (+2pptyoy to 26%) primarily to internal management efficiency enhancement(product standardization, etc) while ASP of transformers/switchgearsremain stable. Helped by higher UHV contribution and further enhancedefficiency, management expects GPM to advance by 2ppt further next year.

Overseas development and GE partnership: Overseas business is growingfast, with c.Rmb4bn of new orders received YTD (mostly in Africa,Southeast Asia, etc.) and c.Rmb1.8bn of sales expected in 2015 (+20%yoy). However, the GE partnership is not progressing as well as expecteddue to low brand recognition in overseas markets.

Capex: With most of the capacity expansion investment completed in2011-12, China XD advises total Capex low at c.Rmb600-700m in thesetwo years, including c.Rmb200m for UHV plant expansion in Changzhou.

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