HAITONG INT'L: First coverage of TSUGAMI CHINA (01651) with an "outperform" rating and target price of HKD 46.94.

HAITONG INT'L released a research report stating that TSUGAMI CHINA (01651) is expected to achieve operating income of 5.439 billion, 6.984 billion, and 8.601 billion yuan for the fiscal years 2026 to 2028, with net profits attributable to the parent company reaching 1.053 billion, 1.132 billion, and 1.589 billion yuan, respectively, and earnings per share of 2.8, 3.49, and 4.23 yuan; based on a P/E ratio of 15 times for the fiscal year 2026, the corresponding target price is HK$46.94, with an initial "Outperform" rating. TSUGAMI CHINA focuses on the manufacturing and sales of high-end CNC machine tools and has grown to become one of the largest foreign-funded brand manufacturers of CNC machine tools in the Chinese machine tool market. Over the past two years, its performance has grown rapidly, with net profits attributable to the parent company reaching 479 million yuan for the fiscal year 2024 and increasing by 63% to 782 million yuan for the fiscal year 2025. The report also pointed out that in the past half year until September of last year, the company's sales revenue increased by approximately 26.2% annually, while net profits attributable to the parent company increased by about 47.7%, indicating solid growth momentum in its main business. The traditional main business focuses on four downstream industries automotive components, IT communication electronics, industrial automation, and medical devices. The automotive industry has been the main growth driver in the past two years. It is expected that the domestic automotive industry will maintain a stable trend this year, and the trend towards miniaturization in processing new energy vehicle components will also help improve the company's market penetration, keeping its automotive-related business stable and growing steadily; the 3C industry is benefiting from the product updates from leading mobile phone manufacturers, showing signs of recovery. HAITONG INT'L predicts that from 2026 to 2028, the company's automotive-related business will continue to show a trend of steady progress, the 3C business will recover, and new businesses such as AI will grow rapidly, driving the company's machine tool business to maintain stable growth of 20% to 25%.