Driven by the dual narratives of AI catalysis and energy transformation, China's A-share power grid equipment sector emerged as the top performer among Shenwan secondary industries during the first trading week of November (November 3-7), posting a 12.45% gain. Transformer and smart meter stocks led the rally. While the surface-level investment thesis centers on power supply-demand imbalances caused by rapid AI industry growth, investors are scrutinizing whether the sector has genuine earnings support and growth potential.
Q3 results reveal significant divergence within the sector: Non-ultra-high voltage transmission segments achieved 38.2% net profit growth thanks to robust overseas demand and domestic resilience, while distribution and meter companies suffered from centralized procurement price cuts and delivery delays. Institutional holdings show mutual funds reduced their exposure to power grid equipment by 0.6 percentage points YoY in Q3, with both domestic funds and northbound capital favoring export leaders and companies with data center business potential.
Sixteen power grid equipment stocks reached all-time highs this week. The Shenwan Power Grid Equipment Index rose 12.46% weekly, bringing its year-to-date gain to 43.11%—nearly matching semiconductors' 46.58% YTD increase. Sector leaders included Tbea Co.,Ltd. (600089.SH), Hainan Jinpan Smart Technology Co.,Ltd. (688676.SH), Jiangsu Shemar Electric Co.,Ltd. (603530.SH), with Ceepower Co.,Ltd. (300062.SZ) and Shanghai Morn Electric Equipment Co.,Ltd. (002451.SZ) surging 78.36%, 48.57%, and 35.34% respectively.
The sector's accelerated rally follows seven consecutive monthly gains since May, fueled by AI-driven power shortages. Global "power hunger" from AI data centers is intensifying, with U.S. EIA projecting record electricity consumption in 2025-2026 and Goldman Sachs forecasting 175% global power demand growth by 2030. Beyond AI narratives, worldwide grid upgrades and China's accelerated power infrastructure investments—including ±800kV UHVDC projects—are strengthening the investment case. State Grid's January-September fixed asset investment grew 8.1% YoY to over ¥420 billion, with full-year 2025 investment expected to exceed ¥650 billion for the first time.
Policy tailwinds continue as China's 15th Five-Year Plan prioritizes smart and microgrid development. Industry sources note grid investment's countercyclical nature and growing urgency for distribution network upgrades amid renewable energy integration pressures.
Q3 financials show sector-wide revenue and profit growth but stark divergence: Non-UHV transmission (+38.2% net profit), UHV transmission (+5.2%), distribution (-23.6%), and meters (-28.4%). Export-driven transformer demand is particularly strong, with China's January-September transformer exports up 39% YoY to $6.22 billion, accelerating to 55.7% growth in September alone.
Institutional positioning reveals mutual funds slightly reduced exposure, while Stock Connect heavily favored export champions like Sieyuan Electric Co.,Ltd. (002028.SZ) and innovators in data center solutions. Hainan Jinpan Smart Technology Co.,Ltd. reported 337.47% growth in data center-related sales (¥974 million), driven by AI and internet data center demand. Investors are closely tracking solid-state transformer (SST) developments—a compact, controllable solution for future DC grids—with Beijing Sifang Automation Co.,Ltd. (601126.SH) among early movers commercializing 10-35kV AC/20-60kV DC input, 240-800V DC output SST products.
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