APAC IPOs & Placements, Aequitas Research

Nicholas Tan

APAC IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Dongfang Electric / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> is looking to raise around US$141m from a primary placement.</li>
<li>The deal is a small one, representing 3.2 days of the stock’s three month ADV, and 1.5% of total shares outstanding.</li>
<li>In this note, we will talk about the placement and run the deal through our ECM framework</li>
</ul>



Dongfang Electric (1072 HK) is looking to raise around US$141m from a primary placement.
The deal is a small one, representing 3.2 days of the stock’s three month ADV, and 1.5% of total shares outstanding.
In this note, we will talk about the placement and run the deal through our ECM framework


Dongfang Electric Placement: Second Primary Raise of the Year

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a>'s recent rally following the Yarlung Zangbo hydropower project announcement appears overdone, as it now trades more than 3SD above average. </li>
<li>We estimate that, even with generous assumptions, the project will add 11.5% of revenue of its annual revenue. This seems unmatched with the 52.7% share price jump.</li>
<li>1Q25 has performed well and deserves a re-rating, but the current extent is excessive. Fair value for the next three years is HK$18-22.8, at best.</li>
</ul>



Dongfang Electric (1072 HK)'s recent rally following the Yarlung Zangbo hydropower project announcement appears overdone, as it now trades more than 3SD above average. 
We estimate that, even with generous assumptions, the project will add 11.5% of revenue of its annual revenue. This seems unmatched with the 52.7% share price jump.
1Q25 has performed well and deserves a re-rating, but the current extent is excessive. Fair value for the next three years is HK$18-22.8, at best.


Dongfang Electric (1072 HK): Is There Any Room Left After the Rally?

<ul>
<li>The collapse in share price of <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> is too excessive. The concerns on margin and orders are overplayed and its latest financial result is solid.</li>
<li>Recurring profit surged 24.8% in 3Q23 and gross margin expanded both YoY and QoQ. For 9M23, new orders rose 19.2% to reach 98% of full-year FY22 level.</li>
<li>We estimate backlog at Rmb197bn, or 3x consensus FY23F revenue, and this provides excellent protection to forward earnings. Its 5.8x and 4.4x PERs are just too undervalued.</li>
</ul>


The collapse in share price of Dongfang Electric (1072 HK) is too excessive. The concerns on margin and orders are overplayed and its latest financial result is solid.
Recurring profit surged 24.8% in 3Q23 and gross margin expanded both YoY and QoQ. For 9M23, new orders rose 19.2% to reach 98% of full-year FY22 level.
We estimate backlog at Rmb197bn, or 3x consensus FY23F revenue, and this provides excellent protection to forward earnings. Its 5.8x and 4.4x PERs are just too undervalued.


Dongfang Electric (1072 HK): We See an Opportunity

<ul>
<li>The market should be happy with the 43.9% YoY growth in recurring earnings at <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> in 1Q23. Gross margin of 18.7% is the highest since 2Q21.</li>
<li>New orders surged 26.1% YoY and 92.4% QoQ to a record Rmb22.6bn in 1Q23. We estimate backlog equals to 1.42x FY23F consensus revenue, meaning a very secured pipeline.</li>
<li>While EPS dilution is a concern, this has already been reflected in share price. The acquisitions of subsidiaries will enhance FY23 earnings. Its 8x PER and 0.8x P/B are inexpensive.</li>
</ul>


The market should be happy with the 43.9% YoY growth in recurring earnings at Dongfang Electric (1072 HK) in 1Q23. Gross margin of 18.7% is the highest since 2Q21.
New orders surged 26.1% YoY and 92.4% QoQ to a record Rmb22.6bn in 1Q23. We estimate backlog equals to 1.42x FY23F consensus revenue, meaning a very secured pipeline.
While EPS dilution is a concern, this has already been reflected in share price. The acquisitions of subsidiaries will enhance FY23 earnings. Its 8x PER and 0.8x P/B are inexpensive.


Dongfang Electric (1072 HK): Profit Surged, Record New Orders Signed

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a>'s management update suggested that its outlook remains encouraging. Order backlog of Rmb87.8bn well covers the FY22 revenue at 1.57x.  </li>
<li>It is positive towards pumped storage, alternative power storage and hydrogen energy. Although they may not have significant near-term contribution, DEC is well-positioned in the long term.</li>
<li>While new A-shares issue will dilute EPS, this should lower gearing (including contract liabilities) to 32.1%, from 49.2%, and is positive to H-share holders as book value will be enhanced.</li>
</ul>



Dongfang Electric (1072 HK)'s management update suggested that its outlook remains encouraging. Order backlog of Rmb87.8bn well covers the FY22 revenue at 1.57x.  
It is positive towards pumped storage, alternative power storage and hydrogen energy. Although they may not have significant near-term contribution, DEC is well-positioned in the long term.
While new A-shares issue will dilute EPS, this should lower gearing (including contract liabilities) to 32.1%, from 49.2%, and is positive to H-share holders as book value will be enhanced.


Dongfang Electric (1072 HK): Positive Takeaways from Post-Result Presentation

China

Dongfang Electric Corporation Limited manufactures and sells hydro and steam power generators and AC/DC electric motors. The Company also provides repair, upgrade, maintenance, and other services for the products.

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Dongfang Electric (1072 HK)

Dongfang Electric Placement: Second Primary Raise of the Year

Dongfang Electric is looking to raise around US$141m from a primary placement. In this note, we will talk about the placement and run the deal...

Nicholas Tan