Overseas business affects the future growth of transformers

Overseas business is very important for the future growth of transformers.

Other businesses can also gradually contribute to the company's performance. The base of photovoltaic business is low, and there is still more space in the future. The reserves of the two major coal mining areas, Gobi and Tinggou, the controlling subsidiary of the Xinjiang Tianchi Energy Company, are abundant and may contribute to the company's profitability in the future.

Nanlin Transformer Co., Ltd. initiated additional issuance, plans to raise funds of 3.7 billion yuan, not exceeding 350 million shares, to carry out the construction of ultra-high voltage, UHV AC/DC technology upgrades, and supporting and overseas business projects. The additional issuance in the long term can enhance the competitiveness of the company and extend the company's growth. In the short term, it will dilute the earnings per share to a certain extent.

Investment advice: It is expected that the company's EPS for 2010-2012 will be 1.11 yuan, 1.31 yuan and 1.45 yuan respectively. Taking into account the high base of the company's performance, the growth rate may decline after 2010. Nanlin Transformer will perform a valuation based on the current valuation of the power equipment industry. The target price is 28 yuan, and the rating is maintained as a recommendation.