In today’s briefing:
- Dongfang Electric (1072 HK): At Full Throttle
- Model Solution IPO Valuation Analysis
- Cummins Inc: The Meritor Acquisition & Other Drivers
Dongfang Electric (1072 HK): At Full Throttle
- Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
- Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging.
- We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.
Model Solution IPO Valuation Analysis
- Our base case valuation of Model Solution is implied market cap of 156 billion won and target price of 24,417 won.
- The IPO valuation range is from 24,000 won to 27,000 won and our target price would be close to the low end of the IPO price range.
- Given the low upside relative to the IPO price range, we have a Negative view of this IPO.
Cummins Inc: The Meritor Acquisition & Other Drivers
- Cummins delivered a third consecutive all-around beat in a quarter that was marked by a number of significant developments including many ke partnerships.
- The company announced partnerships with Daimler Truck, Scania, and North America for delivering fuel cell electric powertrains for heavy-duty truck applications, with Komatsu on developing haulage equipment zero-emission which includes hydrogen fuel cell solutions for the large mining haul truck applications.
- It also achieved a significant milestone in the quarter related to two acquisitions, namely Meritor and Jacobs Vehicle Systems.
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