China High Speed Transmission 0658

[winston]

Vested

BOCOM initiates CHINA HIGH SPEED TRANSMISSION (HK: 658) with ‘buy’ and 17 hkd target

Windfall Profits: China High Speed Transmission makes the gearboxes that keep wind turbines spinning. Demand for wind power installation remained robust under China’s promotion of green energy policies. According to the 12th Five Year Plan, installed wind power capacity of the country would reach 100 GW by 2015, 2.5 times higher than the current level, representing a CAGR of around 20% over the next 5 years. While the growth slows down from that of the 11th Five Year Plan, demand growth remains robust.

Production and sales of wind turbine gearboxes could achieve a y-o-y growth of 30% in 2011. China High Speed Transmission’s new production lines will achieve full capacity in 2011, bringing its total capacity of wind turbine gearboxes up to 12 GW.

Sales of its wind turbine gearboxes reached 9 GW in 2010. The company has currently secured 6 GW orders and is in talks for another 6 GW orders. Based on this, sales of wind turbine gearboxes could grow 30% y-o-y to 12 GW in 2011. Despite slower growth, CHST maintains the growth at a satisfactory level of 30%.

High speed locomotives and CNC machine tools businesses may contribute more in the future. At present, CHST develops the transmission equipment for high-speed locomotives with France’s Alston. It has achieved steady results in tests under 300km/h.

Sales of transmission equipment for high-speed locomotives and urban light rails could achieve over 100% growth in 2011. CHST may substitute the imported products and fall into the sourcing chain of CSR and CNR in the future, thus bringing considerable profit growth to the company.

Investment opportunity lies on cheap valuations. Given the assumption of 30% sales growth in principle products in 2011 and the new growth drivers arising from increased contributions from other operations from 2012 onwards, we expect FY11F/FY12F EPS to reach 1.15 yuan/1.39 yuan.

Our “Buy” rating assigned for initial coverage with a TP of 17 hkd corresponds to a FY11F 13x PE. The stock currently trades at FY11F 9x PE, representing a rather high safety margin.

[winston]

vested

Up 4%.

Someone is buying through MS.

Are they covering or squeezing the shorts ?

[winston]

Vested

DJ MARKET TALK: MS Cuts CHST Target To HK$13.60 From HK$15.50

1148 [Dow Jones] STOCK CALL: Morgan Stanley cuts China High Speed Transmission (0658.HK) target to HK$13.60 from HK$15.50 after lowering FY11-12 EPS estimates by 5.5% and 5.8% respectively.

"Due to continued pricing pressure in the wind turbine market, we expect additional margin pressure on gearboxes." It believes CHST's search for future growth drivers is taking it far from its core strengths in gearbox manufacturing and precision mechanical engineering components.

It says at a P/E of 9.4X and P/BV of 1.4X on 2011, the stock is not expensive, but it is without any visible growth catalysts.

The house keeps an Equalweight call. The stock is +2.1% at HK$11.58.


Source: Dow Jones Newswire

[winston]

Vested

DJ MARKET TALK: Citi Ups China High Speed Transmission To Buy

0856 [Dow Jones] STOCK CALL: Citigroup upgrades China High Speed Transmission (0658.HK) to Buy from Sell with a HK$14.00 target, as "we see most negatives factored in and the valuation has turned attractive."

Citi notes CHST underperformed since 2H10 on concerns over competition from in-house and direct-drive solutions, and turbine ASP pressure, but despite challenges, it expects CHST to maintain near-20% ROE given its scale and volume leadership in wind gearbox equipment.




Source: Dow Jones Newswire

[winston]

Vested

Thursday Morning Short-Selling at 470,000 shares ( out of 2.2m shares ): 21%

[winston]

Vested

Thursday Short-Selling at 833,000 shares ( out of 4.2m shares ): 20%

Am I missing something here ?

Why is the short-selling so heavy when PE is only 12 and growth could come in at around 20% ?

[Atlas]

MARKET TALK: Concerns On China Wind Farm Operators Overdone -JPM (Dow Jones News)
Date: 2011/02/18 11:48


0348 GMT [Dow Jones] JPMorgan says the market's concerns over China wind farm operators are overdone as falling turbine prices will lower investment costs in wind farms and increase project returns.

"We expect weak market sentiment on the sector in the short-term due to macro concerns on interest
rate hikes, but think further downside for wind farm operators is limited."

The house notes the sector's stocks have been relatively weak over the past three to six months on concerns about grid connection problems, the government's tightening measures, falling wind turbine prices (down 5% in the past one to two months), and slightly lower-than-expected new wind capacity additions in
China.

The house prefers wind farm operators such as China Longyuan (0916.HK) and China Datang Corporation (1798.HK) over equipment suppliers such as China High Speed Transmission (0658.HK) and Xinjiang Goldwind (2208.HK) in the near-term.

Longyuan is +2.3% at HK$7.17, while Goldwind is down 0.7% at HK$13.26.


Source: Dow Jones Newswire

[winston]

Vested

UBS bought 11.6m shares, raising their stake from 4.44% to 5.28%

http://sdinotice.hkex.com.hk/di/NSForm2 ... g=EN&dia=Y

[winston]

Vested


Technical: CHS has bounced off key support level after a 61.8% recent peak-trough correction. Risk/ reward looks favorable now.


House view: Analyst Franklin Chow has buy rating on CHS with TPHK$21/share, or 83% upside.


Fundamentals:
1) government restricting production of turbine/component below 2MW
2) growth in new product (2MW & 3MW) to offset margin pressure in low end 1-1.5MW product,
3) moderate increase in wind turbine price lately.


Assumptions:
for 2011E:
1) sales volume 12GW, +32% YoY,
2) revenue/MW flat @ RMB0.62/KW,
3) wind gear box GM decline from 30.5% in 2010 to 29% in 2011E.


Consensus: Franklin’s 2011E revenue forecast of Rmb10.7bn is 15% above consensus, and earnings forecast of Rmb1.7bn is 7% above consensus.


Valuation: stock now trades on 9.8x 2011E consensus PE, at historical trough since listing in 2007.


Catalysts:
1) continued rebound in wind turbine price
2) new orders on high-end products, &
3) lower than expected steel price.


Risks:
1) sizable market share loss to direct-drive technology
2) w-t-e margin compression in 2010, &
3) large order cancellations.



Source: GS

[winston]

vested

have not checked this counter for a while and was pleasantly surprised that it had bounced upwards from HK$11.

Today, it's already up 5% to HK$12.48.

Suddenly, Wind Power is not that bad after all

The shorts must be wondering what hit them