Built on oil, powered by Al; status of Middle East is the largest swing factor

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Built on oil, powered by Al; status of Middle East is the largest swing factor

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Neway Valve (A)

Built on oil, powered by AI; status of

Middle East is the largest swing factor

Initiating Coverage: NEUTRAL | PO: 48.00 CNY | Price: 41.21 CNY

Quality player with near-/medium/term overhangs 17 July 2026

We initiate coverage of Neway, the largest valve manufacturer in China, with a Neutral Equity

rating and a RMB48 PO (18x PER). We like Neway’s 1) leading position and integrated

manufacturing lines; 2) early mover advantage O/S (China’s largest valve exporter); 3) SummerResearch AnalystWang, CFA >>

edge in oil & gas valves with higher technical barriers (key customers are Aramco and Merrill Lynch (Hong Kong)

ADNOC), 4) professional management model; 5) clear strategy to gain share in the high- +852summer.wang@bofa.com3508 4351

end market; and 6) above-peer margins/ROE/div. yield. But we are concerned about 1) Ming Hsun Lee, CFA >>

Middle East conflicts; and 2) FX losses, both of which cloud near-term performance. Research Analyst

Merrill Lynch (Hong Kong)

Middle East developments remain the largest swing factor YikaiResearchLiu,AnalystCFA >>

Disruptions in Middle East pose challenges to 1) its shipments, which could weigh on its Merrill Lynch (Hong Kong)

1H26 results; and 2) progress of its new factory in Saudi Arabia (key for localization). Fiona Liang >>

However, if conflicts ease, we expect Neway to benefit from 1) surging revenue in ME ResearchMerrill LynchAnalyst(Hong Kong)

amid the release of delayed shipments; and 2) rising reconstruction demand as

numerous oil & gas facilities have been damaged. We see 9-22% upside for 2026-28E

EPS, based on our bull-case scenario (assuming shipment fully recovers in 2H26).

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