Chongqing Machinery & Electric Co (2722 HK)

A recap and another overlooked part of the business

CQME has been covered in a few Substacks - first by Mauispartners then Applied Conjectures and Capytal Management. I suggest you read their posts.

CQME is interesting because it will often be dismissed as an idea simply because (a) it has “Chongqing” in its name and (b) is a large conglomerate. In some ways it is like XMH, in that it has hyped data centre exposure next to more prosaic businesses. Like XMH, looking at the boring businesses has helped me get comfortable with investing.

Potential operational efficiencies in the boring businesses driven by the involvement of a new shareholder, Yufu, is already covered by the three writers. What is worth amplifying here is the fact that CQME also has a 37.8% interest in Chongqing Hitachi Energy Transformer, a point recently made by MaiusPartners.

Hard not to get excited reading their website - a good percentage of the output is for export, and as we all know there is a looming power crunch outside China as a result of all the data centres we are building = accelerating demand for transformers that Hitachi is making significant investments to address. Here the Hitachi Energy CEO suggests there is a 3 year backlog for transformers.