Zhongtai International Securities: Reiterates the “Buy” Rating of Weisheng Holdings (03393) and raised the target price to HK$21.75

The Zhitong Finance App learned that Zhongtai International Securities released a research report saying that since the first coverage, the stock price of Weisheng Holdings (03393) has risen 124.5%. The bank believes that the stock price still has plenty of room to rise, raised FY25-27 shareholders' net profit forecasts by 1.2%, 1.6%, and 2.1% respectively, and raised the target price from HK$17.40 to HK$21.75, corresponding 16.0 times the FY26 target price-earnings ratio and 30.4% upward space. If the company is included in the Hong Kong Stock Connect in the first quarter of next year, the company's valuation will be more effectively reflected at that time. The bank reaffirmed the “buy” rating. Demand from AIDC (Artificial Intelligence Data Center) customers for the company's intelligent power distribution services is expected to be higher than expected, and new orders related to FY26 are expected to increase dramatically. As a result, the company's development base was further expanded from the traditional industrial sector to the advanced technology sector, supporting higher valuations.

The main views of Zhongtai International Securities are as follows:

New orders from AIDC customers are expected to increase dramatically next year

With the development of the AI industry, AIDC's power consumption demand supports the growth of the company's intelligent power distribution business. The bank expects additional FY25 related orders of about 2.3 billion yuan (RMB, same below), of which 1 billion yuan of orders will be delivered this year. The bank expects FY26 from AIDC customers to add about 3.6 billion yuan in new orders, an increase of 56.5% over the previous year. Taking into account the FY25 order balance, the bank conservatively expects FY26 to deliver orders to AIDC customers to reach 2.3 billion yuan, an increase of about 130% over the previous year. On the other hand, in addition to cooperating with large AIDC customers such as WIDC-SW (09698), the company is expected to sign up for other large customers to service related overseas businesses, especially data centers in Southeast Asia.

The intelligent power distribution business is expanding rapidly

The smart power distribution business is expected to maintain high growth. Combined, in response to the gross margin of AIDC orders being higher than other smart distribution orders, the bank expects the compound annual growth rate of smart distribution revenue and gross profit to be 25.4% and 27.9% respectively during the FY24-27 period, higher than the 19.8% and 21.8% related growth of the company's total revenue and gross profit. The share of total revenue and gross profit also increased from 33.3% and 24.9% of FY24 to 38.1% and 27.6% of FY27, respectively.

Risk warning: (1) delays in production or project development; (2) sharp rise in raw material prices; (3) falling investment in new power grids; (4) rising overseas production costs.