CICC released a research report stating that the power equipment sector achieved revenue growth of 12.1% year-over-year in 1H25, with non-GAAP net profit increasing 9.3% year-over-year. By segment, primary equipment led growth rates, with profit growth showing primary equipment (+27.2%) > secondary equipment (+7.7%) > grid digitalization (+5.4%) > smart distribution and consumption (-9.6%). From January to July 2025, national grid engineering investment reached 331.5 billion yuan, up 12.5% year-over-year, with State Grid's fixed asset investment scale hitting a record high for the same period. Looking ahead to the next two years, considering the continued robust demand for domestic ultra-high voltage and primary/distribution network construction, grid investment is expected to maintain a compound annual growth rate of approximately 10%. CICC's main viewpoints are as follows:
**1H25 Power Equipment Sector Performance Meets Expectations**
The power equipment sector maintained steady growth: 1H25 revenue increased 12.1% year-over-year, with non-GAAP net profit up 9.3% year-over-year. By segment, primary equipment led growth rates, with profit growth showing primary equipment (+27.2%) > secondary equipment (+7.7%) > grid digitalization (+5.4%) > smart distribution and consumption (-9.6%).
**Strong Domestic Grid Investment, Expected 2024-2026 CAGR Around 10%**
From January to July 2025, national grid engineering investment reached 331.5 billion yuan, up 12.5% year-over-year, with State Grid's fixed asset investment scale hitting a record high for the same period. Looking ahead to the next two years, considering the continued robust demand for domestic ultra-high voltage and primary/distribution network construction, grid investment compound annual growth rate is expected to maintain around 10%.
**Segment Analysis:**
**Primary Equipment:** Dual-engine growth from domestic and overseas markets, with impressive performance growth. The first half benefited from domestic ultra-high voltage products and high-margin overseas product revenue recognition, with business structure optimization driving profitability upward. Continued optimism for accelerated ultra-high voltage project approvals in the second half and positive contribution from high-growth overseas demand to company performance.
**Secondary Equipment:** Main grid protection equipment bidding amounts have surged significantly since this year. Optimistic about companies' steady upward trajectory in grid-connected business, accelerated deployment in off-grid markets including renewable energy, energy storage, and data centers, and leveraging technological competitiveness to expand overseas incremental markets.
**Smart Distribution and Consumption:** Individual stock performance shows divergence, with domestic electricity meter delivery under pressure. Future focus on marginal changes brought by new electricity meter standards; steady growth in meter exports with overseas expansion remaining the main theme as companies break into new markets and accelerate overseas expansion of distribution products.
**Grid Digitalization:** Benefiting from State Grid's bidding recovery and accelerated electricity market construction, companies have abundant orders in hand with improved operational quality. Optimistic about accelerated delivery in the second half to support earnings release, while companies increase deployment in AI-related fields, potentially empowering long-term growth.
**Stock Recommendations:**
1) **Ultra-high voltage:** Henan Pinggao Electric Co.,Ltd. (600312.SH), Nari Technology Co.,Ltd. (600406.SH), China Xd Electric Co.,Ltd. (601179.SH), Xj Electric Co.,Ltd. (000400.SZ), etc.;
2) **Power equipment overseas expansion:** Sieyuan Electric Co.,Ltd. (002028.SZ), Huaming Power Equipment Co.,Ltd. (002270.SZ), WASION HOLDINGS (03393), Ningbo Sanxing Medical Electric Co.,Ltd. (601567.SH), Hainan Jinpan Smart Technology Co.,Ltd. (688676.SH), Guangdong Mingyang Electric Co.,Ltd. (301291.SZ), Hexing Electrical Co.,Ltd. (603556.SH), Hebei Huatong Wires&Cables Group Co.,Ltd. (605196.SH), etc.;
3) **Distribution network and grid intelligence:** Beijing Sifang Automation Co.,Ltd. (601126.SH), State Power Rixin Technology Co.,Ltd. (301162.SZ), Willfar Information Technology Co.,Ltd. (688100.SH), Longshine Technology Group Co.,Ltd. (300682.SZ), State Grid Information & Telecommunication Co.,Ltd. (600131.SH).
**Risk Factors**
Grid investment falling short of expectations, international trade policy change risks, intensified industry competition.
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