Sino-Thai International: Reiterates "Buy" rating for WASION HOLDINGS (03393) FY25 profit exceeded expectations

China Thai International released a research report stating that it reaffirms a "buy" rating for WASION HOLDINGS (03393). After years of development, the company's business has expanded from electric intelligent metering to communication and fluid metering, smart power distribution, etc. WASION HOLDINGS has upgraded from a pure industrial Hong Kong stock to an "industrial + technology" target, which can achieve a higher valuation. Since the coverage began in June last year, the stock price has risen by 247.5%. As of the end of March, the company's performance is maintained, but the target price is raised to HK$32.68, corresponding to a 23.0 times FY26 target P/E ratio and a 26.6% upside potential. China Thai International's main points are as follows: FY25 profit surprise: shareholders' net profit is expected to increase by about 42% to 50% year-on-year The company announced a profit surprise, stating that due to increased revenue and effective cost control, it is expected that shareholders' net profit for FY25 will increase by about 42% to 50%, reaching RMB 10.0 billion to 10.6 billion, respectively, compared to the forecast of RMB 9.3 billion, an increase of 7.5% to 14.0%, and higher than the market consensus forecast of RMB 9.2 billion by 8.4% to 14.9%. Smart power distribution business (including AIDC customers) split listing plan is progressing In January of this year, the company announced plans to spin off Wison Power for a listing on the Hong Kong main board. Wison Power is engaged in smart power distribution business, targeting smart power distribution networks, data centers, and new energy storage. As the AI industry develops, the demand for electricity for AIDC (Artificial Intelligence Data Centers) supports the growth of the company's smart power distribution business. It is estimated that new AIDC customer orders in FY25 will be around RMB 2.3 billion, with RMB 1 billion scheduled for delivery in FY26. Related FY26 new orders are expected to increase by 56.5% year-on-year to RMB 3.6 billion. The spin-off listing of the smart power distribution business is beneficial for unlocking enterprise value. Considering the capital market conditions and regulatory approval process, it is expected that the spin-off listing plan will be completed within this year. Being included in the Hang Seng Composite Index will accelerate the reflection of valuation when included in the Hong Kong Stock Connect The company was officially included in the Hang Seng Composite Index today (March 9), making it eligible for inclusion in the Hong Kong Stock Connect. Technically, the inflow of southbound (from mainland China) funds can accelerate the reflection of the company's valuation. Considering the market characteristics of A-share premiums, it cannot be ruled out that some southbound funds may also give the company a higher valuation. Possibility of entering the US market for the smart power distribution business Recently, several large US tech companies have announced an increase in capital expenditures for AI businesses. Since the company's electric intelligent metering business has already entered the US market, it is possible for its smart power distribution business to follow suit and enter the US market. Risks Production or project development delays; sharp rise in raw material prices; decline in new grid investments; sharp increase in overseas operating costs.