Guoyuan International has updated its revenue forecast for Harbin Electric (01133) and increased the target price. The firm assigned a target valuation of 15.0x PE (2026E), corresponding to a TTM PE of 19.80x, raising the target price to HK$26.35. This implies a potential upside of 30.4% from the current share price, with a maintained "Buy" rating. The key points from Guoyuan International are as follows:

The company expects a net profit of RMB 2.65 billion for fiscal year 2025. The revenue forecast model has been revised upward. Harbin Electric anticipates achieving an attributable net profit of RMB 2.65 billion in 2025, representing a year-on-year increase of approximately 57.2%, surpassing the institution's previous profit expectation of RMB 2.5 billion. The primary reasons for the significant profit growth include increased operating revenue and further improvement in product profitability. This aligns with the institution's prior assessment that the company's previously secured high-value orders would gradually be realized and that there remains room for gross margin expansion. Furthermore, due to the expansion of production scale and a significant enhancement in intelligent manufacturing capabilities, the company's economies of scale and operational efficiency have improved substantially.

The institution has updated its forecast model, raising the future revenue expectations for the company. The main adjustments include: On the revenue side, the growth rate forecasts for the hydropower, nuclear power, and modern manufacturing services segments for 2026-2027E have been increased. This is primarily due to the company's robust order backlog in hydropower and nuclear power, favorable industry momentum, and the potential for hydropower energy equipment to access export markets. Orders for flexibility modifications in thermal power are expected to be gradually realized from the mid-period of the 15th Five-Year Plan. On the profit side, due to the better-than-expected net profit in 2025, the gross margin forecasts for 2026-2027E have been raised, gradually aligning them with the industry average.