Industrial Securities Co.,Ltd. released a research report, initiating coverage on CHONGQING M&E (02722) with a "Buy" rating. Chongqing Cummins and Chongqing Hitachi Energy are seen as having high growth certainty over the coming years, while the core business is gradually entering a profit release phase as impairments decrease. The firm forecasts the company's revenue for 2025, 2026, and 2027 to be 9.678 billion, 10.539 billion, and 11.521 billion yuan, respectively. Net profit attributable to shareholders is projected to be 732 million, 902 million, and 1.019 billion yuan, with corresponding P/E ratios of 9.82x, 8.02x, and 7.11x. The main viewpoints of Industrial Securities are as follows:
As a leading equipment manufacturing enterprise under the Chongqing State-owned Assets Supervision and Administration Commission, CHONGQING M&E is 58.52% owned by Chongqing Holdings (Group). The company's controlling business primarily encompasses equipment-related operations such as hydraulic turbines, wires and cables, gas compressors, industrial pumps, wind turbine blades, and machine tools (including Chongqing Machine Tool and the UK's PTG company). It also holds equity stakes in Chongqing Cummins and Chongqing Hitachi Energy. In 2024, the company's core business revenue was 8.92 billion yuan, a year-on-year increase of 10.7%, with gross profit of approximately 1.555 billion yuan, up 5% year-on-year. Net profit attributable to shareholders was 431 million yuan, surging 42% year-on-year.
Chongqing Cummins is Cummins China's exclusive manufacturer of large-bore engines and benefits from the robust development of the large-bore engine and data center markets. It primarily produces engine models including QSN/NT, QSK19/K19, QSK38/K38, QSK50/K50, and QSK60. Due to tight industry supply, the company is actively expanding its production capacity. High-horsepower engines for data centers and other sectors are expected to sustain growth in the coming years.
Chongqing Hitachi Energy mainly produces transformers rated at 220kv and above, benefiting from overseas high-voltage power grid construction. It is one of Hitachi Ltd.'s primary global production bases for ultra-high-voltage transformers above 750KV. Driven by strong overseas demand, the company is continuously expanding Chongqing Hitachi Energy's capacity. On January 16, 2026, State Grid proposed a 4 trillion yuan investment plan for the 15th Five-Year Plan period, representing a 40% increase compared to the 14th Five-Year Plan, with ultra-high-voltage construction experiencing particularly rapid growth. The firm anticipates that Chongqing Hitachi Energy will benefit from synchronized demand in domestic and international power grids, leading to a prolonged period of favorable market conditions.
Risk warnings include impairments in the core business, data center market development falling short of expectations, and a decline in the operational performance of the core business.
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