The Shenzhen-traded company has filed for a second listing in more internationally focused Hong Kong, seeking to tap soaring investor interest in power equipment stocks



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<h4>Key Takeaways:</h4>



<ul>
<li>Huaming Power has filed to list in Hong Kong, reporting its profit climbed nearly 17% last year on strong demand for its power equipment segment</li>



<li>The company's Shenzhen-listed stock currently trades at a premium valuation, while its future profitability could hinge on copper and aluminum prices</li>
</ul>



The explosion of AI applications and associated need to upgrade aging global grid infrastructure to feed them is creating strong demand for power equipment used for such upgrades. That's charged up shares of Hong Kong-listed manufacturers in the space. Aiming to tap into the frenzy, Huaming Power Equipment Co. Ltd. (002270.SZ) has submitted its own application to list in the market, complementing its existing listing on China's more domestically focused A-share market in Shenzhen.



Electricity underpins the modern global economy and daily life. To meet rising demand for the resource from a growing array of devices, especially power-hungry AI computers, companies are ramping up investments in transmission and distribution equipment, particularly transformers. Tesla CEO Elon Musk predicted as early as 2024 that transformers would become the next major bottleneck in the power buildup after chip shortages. Recent large-scale blackouts across Europe and the U.S., largely caused by aging power equipment, have proven Musk's forecast correct.



Huaming produces tap-changers – core transformer components that are configured with the transformer's mechanical shell, insulation, and oil systems, and also matched with protection interfaces. Tap-changers account for 5% to 25% of a transformer's cost. Crucially, they have been implicated in 25% to 30% of transformer failures historically, making their reliability a paramount purchasing criterion for power suppliers.



<h4>Global number two in tap-changers</h4>



The global tap-changer market features high barriers to entry, particularly due to the long and difficult process of entering each buyer's list of qualified suppliers. The qualification process typically entails rigorous testing, including durability trials of up to 300,000 switching operations over 12 months, creating substantial hurdles for new entrants. As a result, the global market is dominated by a handful of players.



According to third-party research in Huaming's listing document, the global tap-changer industry generated estimated revenue of 10.73 billion yuan ($1.55 billion) in 2025, and the figure is expected to grow to 15.39 billion yuan by 2030. Drivers of that growth include renewable energy grid integration and cross-regional transmission network expansion in China, alongside replacement of aging assets in developed markets and grid construction and capacity upgrades in emerging markets outside China.



In 2024, the world's top three tap-changer manufacturers commanded a combined 82.5% of the market by revenue. A German company dominated the field with 50.2%, followed by Huaming at 17.9%. A Swiss firm ranked third with about 14.4%.



Huaming is China's sole tap-changer manufacturer with fully integrated, end-to-end production facilities. About 80% of its revenue came from domestic sales last year, with the rest from overseas. Its three segments, power equipment, CNC equipment, and its power station EPC business, accounted for 86.6%, 10.1%, and 1.2% of its revenue last year, respectively. The power equipment segment is the company's most profitable unit, contributing 95.2% of its gross profit last year.



Huaming's revenue rose 4.5% year-on-year to 2.41 billion yuan in 2025, buoyed by growth in the power equipment and CNC equipment segments. The power equipment segment was especially strong, growing 16.1% annually. That lifted the company's total gross profit by 16.6% to 1.3 billion yuan for the year. Aided by improved profitability in the power equipment unit, the company's gross margin climbed 5.6 percentage points to 53.9%. That greater efficiency helped Huaming's net profit rise 16.7% to 720 million yuan for the year.



<h4>Rising raw material costs</h4>



Despite its rising gross margin, investors should note a major potential risk factor for Huaming lies in the costs of copper and aluminum that are key raw materials for tap-changers.



Huaming's raw material and component costs rose from 639 million yuan in 2023 to 834 million yuan the next year, before easing slightly to 811 million yuan last year, growing steadily from 67.6% of total cost of sales in 2023 to 73% in 2025. Copper prices rose steadily to new highs over that period, while aluminum also rebounded. Continued price hikes could pressure Huaming's margins, especially if an anticipated global boom in copper demand materializes.



Huaming's Shenzhen-listed shares aren't cheap, trading at a price-to-earnings (P/E) multiple of nearly 40 times the company's forecast earnings for this year. Similar transformer play Chongqing Machinery &amp; Electric (2722.HK) trades far lower at about 10 times, while peer power equipment stocks Dongfang Electric (1072.HK) and Harbin Electric (1133.HK) trade at 29 times and 15.4 times. That leaves Huaming's Shenzhen shares squarely at the upper end of its peer group.



That said, Huaming shares could still draw some serious attention due to strong demand for its products in China and big potential in a global market that currently makes up just 20% of its sales. Its current factories in Turkey and Indonesia leave it well placed to boost its global market share. The primary caveat will be how the company prices its shares. A Hong Kong listing priced above 25 times forward earnings, while sharply below the 40 multiple for its A-shares, could still be an overextension. Anything below that could provide a more compelling option for investors.



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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

002270

Huaming Power Equipment Co. Ltd. has filed for a secondary listing in Hong Kong, aiming to capitalize on the growing demand for power equipment amid rising investor interest. The company reported a nearly 17% profit increase last year, driven by its power equipment segment. However, its profitability may be affected by fluctuating copper and aluminum prices. Huaming is a leading tap-changer manufacturer, with 80% of its revenue from domestic sales. Despite rising costs, the company’s gross margin improved, but its shares trade at a high valuation compared to peers.

Huaming Files For Hong Kong IPO, Riding Power Equipment Boom