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Shenzhen Clou Electronics Co:Multiple growth drivers ahead from New Energy;initiate at Neutral

发布时间:2016-06-08    研究机构:高盛高华证券

Investment view

Clou is a leading smart metering and power distribution equipmentmaker in China, and actively expanding its business portfolio in NewEnergy (solar farm operation, EV charging facility manufacturing, andenergy storage accounting for 62% of 2018 gross profit vs. 25% in 2015).

We see Clou creating a smart energy eco-system with multiple businesslines and forecast 2015-18 gross/net profit CAGR of 34%/42%, driven by82% CAGR in New Energy. However, with the stock trading at 28x 2017EP/E vs. 32x sector average and our 12-month target price offering 3%upside potential, valuation looks fair. Hence, we initiate Clou at Neutral.

Core drivers of growth

1) EV charging stations: We forecast a c.150% yoy rise in 2016 revenueto Rmb650 mn, driven by growing supportive policies and sharp increasein electric vehicles (EV) ownership. Clou has a track record in this, andstrategic relationships with auto OEMs and public transport companies.

2) Energy storage: We expect military demand to pick up as they look toreplace diesel power engines and realize energy self-sufficiency. This,along with the potential JV with LG Chem, is a near-term earnings driver.

3) Solar farms: Clou has secured around 365MW late-stage projects in2H15 on top of the 280MW projects in operation by end 2015.

4) Power distribution: We see steady earnings ahead on NEA’s plan toinvest over Rmb2 tn in power distribution network upgrade in 2015-20.

Risks to the investment case

Up: Solar curtailment issues resolved, JV progress; Down: smart meterslowdown, EV charging delays or competition, lack of strategic focus.

Valuation

We use a 2017E P/B vs. ROE correlation with peers to derive our targetP/B-ROE of 29.2x and consequently our 12-month target price of Rmb26.1.

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