Domestic investment acceleration combined with global demand surge, leading to both profit growth and valuation increases for power grid equipment companies.

Ask AI · Why does the global energy transition boost China’s power grid equipment export advantages?

According to Kechuangban Daily, the latest data show that in the first quarter, China’s power grid investment growth rate exceeded expectations. In the first quarter, State Grid completed fixed-asset investment of nearly 130 billion yuan, up about 37% year over year, driving investment of more than 250 billion yuan across upstream and downstream sectors. Meanwhile, in the first quarter, China Southern Power Grid invested 38.45 billion yuan, up 49.5% year over year. At the same time, from January to February, China’s exports of power equipment reached 16.1 billion yuan, up 33.6% year over year.

With first-quarter growth in both power grid investment and exports exceeding expectations, the main drivers are three factors:

First is policy support. During the “15th Five-Year Plan” period, the total investment in the two major power grid projects is set to reach 5 trillion yuan, with annual investment of nearly 1 trillion yuan. Coupled with the two sessions report’s first mention of “computing power and power coordination,” the dual demand from new infrastructure and the energy transition pulls both grids to move forward and advance the rollout of some projects;

Second is faster tendering. Projects such as the ultra-high-voltage “three links and one straight” project awaiting tender, as well as year-on-year surges in bidding volume for State Grid’s transmission and transformation equipment and power meters, all help ensure construction progress;

Third is demand expansion. Demand surges for connecting renewable energy and for data center power supply, among others. In the first quarter, State Grid’s investment in renewable energy grid connections exceeded 10 billion yuan, up more than 50% year over year.

Additionally, from a global perspective, over the past decade, global power grid investment has generally lagged behind power generation investment. As issues such as the energy transition, grid aging, and electricity demand from AI emerging industries have become more prominent, power grid investment has now entered a period of favorable conditions. In particular, Europe’s energy transition plan is expected to unlock at least 1.2 trillion euros in investment; the United States’ initial phase rolled out a 75 billion US dollar upgrade plan (with further investment disclosures expected later), while shortages of power equipment across Europe and the United States are also quite severe, and import dependence is high.

China’s power grid equipment industry chain is complete, its technology is leading, and its cost-performance is outstanding, making its export advantages significant. Leading companies have already completed their overseas deployment, and this year they have accelerated efforts to tap incremental overseas market opportunities.

Looking ahead, in the second quarter and the second half of the year, domestic power grid investment will still remain at a high level, and the total annual investment scale of the two grids may be close to 1 trillion yuan. In particular, investment in ultra-high voltage, digitized and intelligent distribution networks, and computing power and power coordination will continue to be stepped up, and both performance and valuations are expected to improve in tandem.

In addition, with a surge in demand among major economies in Europe and the United States, exports of domestically produced power and grid equipment this year may continue to maintain high growth of 30% or more. Demand for sub-segments such as transformers and cables will continue to be released.

Zooming in on the A-share market, you can focus on three major sub-segments of power grid equipment: leaders in core ultra-high-voltage equipment, main manufacturers of transmission and transformation equipment, and export-oriented power equipment companies. (Guangda Securities Micro Information)