CMSC has released a research report stating that the gas turbine sector benefits from a significant increase in overseas orders, showing the most prominent profit elasticity, with core stocks generally achieving favorable returns. The diesel generator segment maintains steady revenue, with improving marginal profit recovery capabilities. The refrigeration equipment sector's growth performance in Q1 2026 surpasses that of the full year 2025. Furthermore, from a supply-side perspective, the ongoing construction of overseas AI data centers continues, with the power supply gap expanding from nearly 30%, compounded by rising energy costs driving demand for backup power, gas turbines, and liquid cooling equipment. Finally, the report highlights three key investment directions: gas turbines, diesel backup power, and refrigeration equipment. The main views of CMSC are as follows:
AI Data Center Industry: Transition from Theme-Driven to Performance Realization, Strengthening 2026 Growth Expectations In 2025, the accelerated construction of AI data center computing infrastructure has led to the gradual realization of demand for power shortage equipment, power systems, energy equipment, and temperature control systems. The related machinery and equipment sector has shifted from early theme-driven momentum to being driven by orders and performance. Entering the first quarter of 2026, the sector's activity continues to heat up. Sample stocks of AI data center-related machinery and equipment recorded an average cumulative return of approximately 75.7% from early January to early May, with a median return of about 84.5%. Core performers such as Jereh Group and Weichai Power (Automotive) have stood out.
Demand Side: Overseas AI Data Center Construction Drives Expansion of Power Supply Gap, Sustaining High Growth in Related Equipment Stocks The demand for gas turbines in the United States is projected to reach 23.1GW in 2025, with a supply gap of approximately 28%. This gap is expected to further widen in 2026, leading to increased energy costs across the U.S. power industry, with more pronounced cost increases in the electricity sector. This drives concurrent demand for gas turbines, backup power systems, and temperature control equipment.
Supply Side: Energy and Equipment Delivery Bottlenecks Highlighted, Price Resilience and Production Scheduling Constraints to Persist in 2026 Since the beginning of 2026, the Producer Price Index for gas turbines and generator sets in the U.S. and Japan remains elevated. Order backlogs for leading global gas turbine manufacturers extend to 2030. Domestic enterprises benefit from import substitution opportunities, spillover of overseas orders, and prospects in core component supply chains. The prosperity of supply chains for diesel generators, gas turbine components, and liquid cooling equipment is expected to continue rising.
Key Industrial Chain Investment Directions: 1) Gas Turbines: For gas turbine component castings, focus on Yingliu Co., Ltd., Wanzefu Co., Ltd. (Defense), Liande Co., Ltd., and Boying Special Welding. Among these, Liande Co., Ltd. is involved in gas turbine component castings and is a supplier to Caterpillar, representing a relatively core segment. Boying Special Welding supplies GEV and Siemens, involved in Heat Recovery Steam Generators for gas turbines, holding a core position in the industrial chain. For the domestic gas turbine chain, focus on Dongfang Electric Corporation and China Shipbuilding Industry Group Power Co., Ltd. Some companies have expectations for North American exports, and overseas order progress for the domestic gas turbine chain is favorable. For packaged unit companies, focus on Jereh Group, which has successfully entered the North American data center market with its gas turbine business.
2) Diesel Generators: Weichai Power (Automotive) holds a relatively core position. Generator set companies such as Weichai Heavy Machinery, K-Tech Power, and Tellhow Technology (Defense) possess both expectations for import substitution in diesel generators and overseas expansion.
3) Refrigeration Equipment: Moon Environment Technology Co., Ltd. is a core company and owns the North American local air conditioning sub-brand Dunham-Bush, enabling it to directly benefit from the construction of the North American AI industrial chain.
Risk Warnings: 1. Weakening capital expenditures by domestic and international AI giants, or failure to fulfill capital expenditure commitments. 2. Persistent Sino-U.S. trade conflicts leading to restricted supply of overseas computing power chips. 3. Power growth per server rack falling short of expectations. 4. Domestic diesel engine capacity expansion falling short of expectations. 5. Growth in end-user application demand for computing power falling short of expectations.
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