Scenario analysis on US regulatory uncertainty, lower TP but maintain Buy on Sieyuan and Huaming

Sieyuan's share price has declined c.33% since the US Executive Order 14421 was issued on Aug 26. The EO focuses on security threats to the US 69kV+ bulk-power system associated with foreign-produced electrical equipment and technology, and directs the US Dept of Energy to publish the implementation framework within 120 days of the August announcement; EO 14421 follows a similar framework to EO 13920 issued in May 2020. In this note we assess three scenarios considering two variables: US market access for Sieyuan, and industry competition determined by evolving supply and demand, where US market growth is a key contributor. Our base case takes no view on whether restrictions will directly apply to Sieyuan (status quo) but factors increased competition and gradual margin declines as global capacity additions ease equipment shortages, cutting EPS by 9-14% and implying 27% upside at 20x P/E. Our bull case assumes no EO impact and greater penetration of US grid operators and CSPs, with US