China Merchants Securities (CMSC) recently released an industry research report indicating that the State Grid Corporation of China's fixed asset investment during the "16th Five-Year Plan" period is projected to reach 4 trillion yuan, representing a significant increase of approximately 40% compared to the planned value for the "14th Five-Year Plan". Based on the 2025 investment figure, achieving this total target implies an annualized compound growth rate (CAGR) of about 7%, which is essentially on par with the growth rate (7.1%) seen during the "14th Five-Year Plan" period, suggesting that the actual investment intensity could be even higher. This signals a rapid shift in the focus of grid investment from "providing a baseline for stable growth" towards "constructing a new power system," with high industry prosperity expected to persist throughout the entire "16th Five-Year Plan" period.
The report analyzes that the investment will primarily concentrate on key areas such as green transformation, ultra-high voltage (UHV) construction, distribution network upgrades, energy storage, and digitalization, which are anticipated to provide substantial support for the performance of related companies in the industrial chain.
The pressure on power consumption integration is becoming prominent, making UHV and energy storage critical pathways. The current power system faces significant integration challenges. On the demand side, total electricity consumption is expected to maintain rigid growth driven by new demands such as electric vehicles and artificial intelligence computing power. On the supply side, the installation of wind and solar new energy capacity experienced explosive growth during the "14th Five-Year Plan" period, with newly added national photovoltaic and wind power capacity accounting for nearly 80% of the total in the past three years, far exceeding the original grid planning's carrying capacity. The "scissors gap" formed by the intensifying volatility on the power generation side and the relatively lagging grid construction has made integration difficulties the core contradiction. Building outbound transmission channels (UHV/main grid) and enhancing system regulation capabilities (energy storage/distribution network) are seen as the primary technical paths to resolve this conflict.
Simultaneously, overseas power grids are entering a "Juglar cycle" renewal phase. The average service life of grid equipment in Europe and America is approaching the 30 to 40-year renewal threshold, and coupled with growing electricity demand from emerging fields like artificial intelligence, overseas grid investment is in a phase of "passive acceleration." Due to limited expansion of local production capacity, leading Chinese power equipment companies are demonstrating strong delivery capabilities and competitive advantages in areas such as transformers, switches, smart meters, and insulators. Leveraging their early overseas market presence, these advantaged companies are expected to achieve more prominent development during this global cycle.
The report suggests focusing on the following companies for investment attention.
Domestic business focus: NARI Technology Co., Ltd., Sieyuan Electric Co., Ltd., Sifang Co., Ltd., China XD Electric Co., Ltd., TBEA Co., Ltd., XJ Electric Co., Ltd., Pinggao Group Co., Ltd., New Guangsheng, Jinguan Electric, Changgao Group.
Overseas layout focus: Sieyuan Electric Co., Ltd., Eaglerise Electric & Electronic Co., Ltd., Jinpan International Ltd., TBEA Co., Ltd., Shenma Power Co., Ltd., Sanxing Medical, Haixing Electric, Juhua Technology.
The report also highlights risks, including the possibility that electricity consumption and economic growth may fall short of expectations, potentially affecting the pace of investment implementation, and that rapid industry capacity expansion could put pressure on profitability levels.
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