**Performance Overview**
On August 15th, Sieyuan Electric Co.,Ltd. released its 2025 interim report. For the first half of 2025 (1H25), the company achieved revenue of RMB 8.45 billion, representing a year-over-year increase of 37.8%, with net profit attributable to shareholders reaching RMB 1.29 billion, up 45.7% year-over-year. In Q2, revenue reached RMB 5.27 billion (up 50.2% YoY) and net profit attributable to shareholders was RMB 850 million (up 61.5% YoY), meeting expectations.
**Business Analysis**
**Sustained high demand overseas, grid construction exceeding expectations, significant growth in off-grid renewable energy installations**
1) **Overseas Markets**: From January to June 2025, China's power transformer exports totaled $2.6 billion, maintaining rapid growth with a 49% year-over-year increase. The company achieved breakthroughs with multiple products in various markets including the UK, Italy, Saudi Arabia, and Kuwait, obtaining certifications in multiple countries. Overseas market revenue for H1 reached RMB 2.86 billion, up 88.9% year-over-year, positioning the company to continuously benefit from overseas power equipment demand spillover as international orders accelerate delivery.
2) **Domestic Market**: Grid engineering investment completed RMB 291.1 billion from January to June 2025, up 15% year-over-year. The third batch of State Grid's transmission and transformation equipment tenders recorded winning bids totaling RMB 21.19 billion, up 38% year-over-year, setting a new record for single-batch tender amounts. The cumulative winning bids for the first three batches reached RMB 54.06 billion, up 25% year-over-year, primarily driven by faster-than-expected Northwest grid construction boosting equipment tender growth. The company's combined winning bids for the first three batches totaled RMB 3.92 billion, up 80% year-over-year, mainly due to significantly increased market share in 750kV GIS tenders.
3) **Off-grid Segment**: Wind power and solar installations added 51GW and 212GW respectively from January to June, up 99% and 107% year-over-year. The company is actively developing off-grid businesses including power generation, rail transit, petrochemicals, and metallurgy.
**Sustained profitability improvement with emerging businesses scaling up, optimistic about exceeding 2025 targets**
The company's gross margin for 1H25 was 31.9%, up 0.2 percentage points year-over-year, with overseas business gross margin at 35.7%, up 1.9 percentage points year-over-year. The profitability improvement is primarily attributed to business structure optimization driven by increased proportion of high-margin ultra-high voltage equipment and overseas revenue.
The company's actively cultivated second growth curve is beginning to show results, with automotive electronics business revenue growing 216.6% year-over-year in H1, achieving rapid expansion. For 2025, the company targets new orders of RMB 26.8 billion (excluding tax), up 25% year-over-year, and aims to achieve revenue of RMB 18.5 billion, up 20% year-over-year. We are optimistic about the company exceeding its 2025 operational targets.
**Earnings Forecast, Valuation and Rating**
With clear development strategy and business planning, the company is well-positioned for continued growth across product categories amid accelerating domestic grid investment and sustained overseas power equipment demand. We forecast the company will achieve net profit attributable to shareholders of RMB 2.75/3.48/4.34 billion for 2025-2027, representing year-over-year growth of 34%/27%/25%. At current stock price, the company trades at P/E ratios of 25x/19x/16x, maintaining "Buy" rating.
**Risk Factors**
Investment/overseas expansion/product promotion falling short of expectations, raw material price increases, intensified industry competition
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