Wasion (3393 HK, HK$2.93, BUY) – Prospect unchanged

FY12/08A results beat our estimates with profit up 22.8% to RMB261.5m. Surprise came from overseas market, which generated RMB115.0m revenue for FY12/08A, up from RMB40.2m last year. Hunan Weiming, acquired in May 2008, contributed another RMB58.3m, bringing the total top line to RMB1,059.4m, up 31.8% YoY and 12.0% higher than our estimate (RMB946.0m at "Powered by the Stimulus Package, 18 Mar 09). A major improvement during the period, in our view, was that the company managed to shorten its cash conversion cycle by 18 days to 124 days thanks to: 1) strengthening payment collection from main customers (i.e. grid companies); 2) development of non-power grid clients (FY12/08A: 23% of total sales, FY12/07A: 16%) such as Petro China and overseas customers, who usually pay deposit for the procurement. We highly credit this improvement given it will largely reduce working capital requirement and release more free cash flow. We lift our earnings forecasts by 15.9% for FY12/09F to RMB291.5m and 16.4% for FY12/10F to RMB379.0m. Accordingly, the new DCF fair value comes out to be HK$3.75, which we adopt as our new target price (previous: HK$2.95).

Prospect unchanged

Sales Post: Harbin Power Equipment (1133 HK) - Laggard in China power equipment segment

Harbin Power Equipment's (1133 HK) newly acquired orders increased 55.0% YoY to RMB34.3b in 1H FY12/08A. In 1H FY08, the group’s blended margin expanded by 2.8 ppts to 15.4%, against the revenue of RMB12,856.7m. The group was in net cash position of RMB4,613.3m, or RMB3.35 per share (HK$3.8/share). onsensus put the group’s earnings for FY08 at RMB2,613.6, representing an annual decline rate of 20.6%. Currently, Dongfang Electric (1072 HK) and Shanghai Electric (2727 HK) is trading at FY09E P/E of 8.9x and 10.0x. Harbin Power Equipment is trading at FY09E P/E of 5.7x.

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Wasion (3393 HK, HK$1.96, BUY): Powered by the stimulus package (initiating coverage)

Waison (3393 HK) is a beneficiary of the increased investment budget by grid companies as part of China’s economy stimulus plan. It is projected that RMB93b will be spent on electricity data collection systems in 2009 – 2011. Waison has 20-25% market share for three-phase power metres and ~5% for electronic single-phase ones. We estimate that the company can capture 5-10% share of total RMB93b investment. Undemanding valuation. BUY call.

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