Investment Rating - The industry investment rating is "Outperform the Market - A" [1] Core Insights - The artificial intelligence (AI) industrialization wave is approaching, leading to a rapid increase in demand for Artificial Intelligence Data Centers (AIDC) [4][11] - Power distribution equipment is a crucial component of AIDC and is expected to benefit significantly from the high demand in AIDC [36] - Major companies involved in the AIDC sector are highlighted, indicating potential investment opportunities [3] Summary by Sections Section 1: AI Industrialization and AIDC Demand Growth - AI is at a critical turning point for commercial deployment, driving a rapid increase in demand for intelligent computing power [4][11] - AIDC serves as the physical carrier for intelligent computing power, benefiting from the AI industrialization wave [12] - AIDC is evolving towards high energy consumption and high density, necessitating continuous upgrades in power distribution equipment [30][35] Section 2: Power Distribution Equipment in AIDC - Power distribution equipment is a vital part of AIDC, accounting for approximately 13% of initial investment costs [42] - AIDC's power supply architecture typically employs redundancy designs to ensure high reliability [43][44] - Diesel generator sets are the most common backup power solution for AIDC [56][60] - The transition from UPS to high-voltage direct current (HVDC) systems is anticipated, with HVDC becoming the mainstream architecture in the future [68][86] - The market for server power supplies is projected to exceed 100 billion, with supercapacitors and battery backup units (BBU) being key growth areas [113]

Core Viewpoint - The A-share computing power sector underwent a significant value reshaping in 2025, transitioning from policy-driven expectations to performance verification, with the Wind computing power theme index rising by 80% year-to-date as of December 25, 2025 [1] Performance Highlights - The Wind computing power theme index closed at 7108 points, with 22 stocks in the sector doubling in value, and four stocks, including Shijia Photon, Xinyi Sheng, Yongding Co., and Zhongji Xuchuang, seeing increases over 400% [1][2] - Major companies like Haiguang Information reported a revenue of 9.49 billion yuan, up 54.65% year-on-year, and a net profit of 1.961 billion yuan, up 28.56% [7] - Cambrian Technology achieved a staggering revenue growth of 2386.38% year-on-year, reaching 4.607 billion yuan, with a net profit of 1.605 billion yuan [8] Structural Differentiation - The computing power sector displayed a "ice-fire duality" with a structural differentiation, reflecting a reassessment of value creation capabilities across the computing power industry chain [6][7] - The market focus shifted from "concept" to "performance," favoring companies with clear technological paths and real profit growth [7] Domestic Substitution Progress - The domestic substitution process in the computing power sector transitioned from "policy-driven" to "market-driven," with a comprehensive ecosystem emerging that includes chips, servers, and foundational software [11] - Leading companies like Huawei have established vertical integration capabilities, enhancing the domestic computing power ecosystem [12] Technological Iteration and Breakthroughs - The year 2025 saw significant technological breakthroughs characterized by hardware upgrades and software ecosystem improvements, particularly in liquid cooling technology and AI chip performance [14][15] - Liquid cooling technology has become a key solution for meeting energy efficiency standards, with companies like Yingwei achieving substantial revenue growth due to their innovative solutions [9] Future Outlook - The value reshaping of the A-share computing power sector is expected to continue into 2026, with a focus on high-performance AI chips and the broader application of liquid cooling technology [16] - The competition will shift towards ecosystem collaboration, with companies that can provide comprehensive solutions across hardware, software, and services gaining a competitive edge [16]

Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [2][10]. Core Insights - The company, a leader in high-power power supply solutions, is expected to benefit significantly from the AI wave, leading to high growth in its server power supply business. Revenue projections for 2025-2027 are 48.42 billion, 59.10 billion, and 69.33 billion yuan, with net profits of 3.80 billion, 5.06 billion, and 6.39 billion yuan respectively [7][10]. - The company has a diversified business model with three main segments: power adapters, server power supplies, and other power solutions, which collectively form a robust growth strategy [9][24]. Summary by Sections 1. Company Overview - The company has over 20 years of experience in the switching power supply sector, evolving into a leading manufacturer of power adapters, server power supplies, and other power solutions. It was established in 1996 and has expanded its product offerings significantly since then [21][24]. 2. Server Power Supply - The company is positioned as a domestic leader in high-power server power supplies, expected to benefit from the increasing demand for AI computing power. The server power supply segment is projected to grow significantly, with revenue growth rates of 60%, 40%, and 28% from 2025 to 2027 [9][10][15]. - The company’s products cover a wide range of power requirements, including high-efficiency solutions tailored for AI servers, which are critical for meeting the evolving demands of the market [9][74]. 3. Other Business Segments - The power adapter segment remains a stable revenue source, while the company is actively expanding into new areas such as electric vehicle chargers and other specialized power products, which are expected to contribute to future growth [9][82]. - The company is leveraging the recovery in consumer electronics demand to boost its power adapter sales, with significant growth anticipated in the display market, driven by new technologies and increased gaming demand [82][85]. 4. Financial Projections and Valuation - The company is projected to achieve total revenues of 48.42 billion, 59.10 billion, and 69.33 billion yuan from 2025 to 2027, with corresponding net profits of 3.80 billion, 5.06 billion, and 6.39 billion yuan. The report suggests a target market capitalization of 311.45 billion yuan for 2026, indicating a potential upside of 21% from the current market value [10][15].

Summary of AIDC Industry and Company Insights Industry Overview - The North American data center market is rapidly expanding, with individual capacities approaching gigawatt levels and showing a trend towards clustering, which significantly pressures regional power grids. The local power infrastructure is lagging behind, and the Chinese supply chain plays a crucial role in the construction of AI infrastructure in North America [1][2][9]. Key Points and Arguments - **Challenges in Data Center Construction**: The U.S. data center construction faces mismatches in construction cycles and delays in equipment delivery. Key equipment like transformers and UPS systems now have delivery times extending beyond two years, highlighting the need for multi-energy complementarity to optimize power supply [1][5][6]. - **Power Supply Optimization**: The optimization of power supply is critical due to the high demand for stable power sources. Natural gas generation is stable, but the supply of gas turbine equipment is tight, with orders extending to 2028. Multi-energy complementarity is emerging as a potential development direction [7][9]. - **Infrastructure Development Needs**: The rapid growth of data centers has created significant incremental demand for both power supply and grid infrastructure. However, the local supply chain is unable to fully meet these demands, leading to opportunities for Chinese companies [2][4]. - **Technological Upgrades**: The AIDC market is expected to see significant growth trends driven by technological upgrades and infrastructure development. The iteration of NVIDIA GPU cards is a key node, prompting power companies to upgrade their technologies to meet the increasing power density demands [2][10]. Investment Recommendations - **High Certainty Companies**: Focus on companies with high performance certainty such as Siyuan Electric, Jinpan Technology, Igor, and Kstar, as well as competitive companies with strong positioning like Sungrow Power Supply and Megmeet [3][10][11]. - **Emerging Technologies**: The competitive landscape in data center power supply includes key players like Megmeet, Delta, and others. New emerging models such as Sidecar direct connection or distributed Sidecar, as well as HVC Power Systems, are being explored by leading companies [3][12]. Additional Insights - **Regional Grid Structure**: The U.S. grid is composed of multiple independent regional grids, which leads to insufficient capacity, especially under the demands of AI data centers. This situation necessitates the integration of flexible resources like energy storage to optimize grid connection processes [6][8]. - **Opportunities for Chinese Companies**: Chinese enterprises have opportunities in the North American AI development landscape due to mismatches in infrastructure supply and demand, as well as technological upgrades that allow for cooperative models to fill gaps in rapid response capabilities of overseas manufacturers [9][10]. - **Future Trends**: The AIDC market is expected to continue its growth into 2026, with a focus on performance certainty and new technology positioning as critical investment references [2][10].

Market Overview - The market experienced a strong upward trend with the Shanghai Composite Index rising for six consecutive days, and the Shenzhen Component Index increasing by nearly 1%. Over 4,100 stocks in the market saw gains [1] Spring Market Outlook - The spring market may unfold in two ways: first, capital may rush in to buy on dips, leading to a generally strong market; second, if incremental capital is exhausted and negative news arises, a "deep squat jump" may occur. Currently, there is a strong willingness among A-share investors to capitalize on the spring market, with limited visibility of negative factors [2] - Historical data suggests that sectors with high returns in the first half of the year may see a pullback at the end of the year, while underperforming sectors may experience a rebound. The internal demand sector is highlighted as having sufficient attractiveness and increasing win rates, supported by year-end industry allocation patterns and policies aimed at boosting domestic demand [2] Key Sectors to Watch - Focus on sectors such as insurance, brokerage, non-ferrous metals, AI computing/power semiconductors, retail/personal care/social services/dairy products, aviation, and new energy [3] North American AI Power Supply Issues - North America faces a significant power supply gap, exacerbated by the growing demand for AI Data Centers (AIDC). Traditional rapid energy replenishment methods are limited, making AIDC energy storage solutions more economically viable and quicker to deliver. The demand for AIDC energy storage is projected to increase from 9.6 GWh in 2025 to 21 GWh by 2028, with storage duration extending from 4 hours to 6-8 hours [4] - The global AIDC transformer market is expected to grow significantly, with estimates of 60 billion yuan in 2024 and 264 billion yuan in 2027, reflecting a compound annual growth rate (CAGR) of approximately 64% [4] Transformer Export Data - According to customs data, China's transformer exports totaled 579 million yuan from January to November, marking a year-on-year increase of 36%, indicating sustained high demand in the transformer export market [5] AIDC Concept Stocks - AIDC concept stocks focus on core areas such as computing infrastructure, liquid cooling, power distribution, and network equipment. Key players include: - **Core Computing and IDC Operations**: Companies like Zhongke Shuguang and Inspur Information are leading in liquid cooling and AI server markets [6] - **Liquid Cooling Technology**: Companies such as Yingweike and Qiu Tianwei are key suppliers in the liquid cooling sector, catering to AI server needs [7] - **Power Distribution and Storage**: Companies like Zhongheng Electric and Kehua Data are positioned to meet AIDC power supply demands [8] - **Network and Server Support**: Companies such as Xinyi Sheng and Zhongji Xuchuang are critical suppliers for AI computing network transmission [8]

Market Overview - The Shanghai Composite Index rose by 0.53% on December 24, with 26 out of 28 sectors experiencing gains, led by defense and electronics sectors, which increased by 2.88% and 2.12% respectively [1] - The power equipment sector saw a rise of 1.03% [1] - The agriculture, forestry, animal husbandry, and fishery sectors, along with coal, were the worst performers, declining by 0.85% and 0.70% respectively [1] Capital Flow Analysis - The net inflow of capital in the two markets was 10.37 billion yuan, with 17 sectors experiencing net inflows [1] - The electronics sector had the highest net inflow of 8.68 billion yuan, followed by the power equipment sector with a net inflow of 3.76 billion yuan [1] - Conversely, 14 sectors experienced net outflows, with the non-ferrous metals sector leading with a net outflow of 1.635 billion yuan [1] Power Equipment Sector Performance - The power equipment sector had a net inflow of 3.76 billion yuan, with 310 out of 365 stocks in the sector rising, and 9 stocks hitting the daily limit [2] - The top three stocks with the highest net inflow were Tianji Co. with 982 million yuan, followed by Maigemi Te with 503 million yuan, and Zhongheng Electric with 427 million yuan [2] - The sector also had 8 stocks with net outflows exceeding 100 million yuan, led by Sunshine Power with a net outflow of 340 million yuan [4] Top Gainers in Power Equipment Sector - Tianji Co. saw a price increase of 10.00% with a turnover rate of 31.76% and a net inflow of 982.35 million yuan [2] - Maigemi Te and Zhongheng Electric also increased by 10.00% and 10.02% respectively, with significant net inflows [2] Top Losers in Power Equipment Sector - Sunshine Power experienced a decline of 1.26% with a net outflow of 339.58 million yuan [4] - Other notable losers included Jia Yuan Technology and China West Electric, with net outflows of 236.25 million yuan and 188.51 million yuan respectively [4]

Core Viewpoint - The other power equipment sector experienced a significant increase of 3.7% on December 24, with Xinle Energy leading the gains, reflecting positive market sentiment in this industry [1]. Group 1: Market Performance - The Shanghai Composite Index closed at 3940.95, up by 0.53%, while the Shenzhen Component Index closed at 13486.42, up by 0.88% [1]. - Notable stocks in the other power equipment sector included: - Xinfu Energy (300593) with a closing price of 30.24, up by 20.00% and a trading volume of 632,300 shares, totaling a transaction value of 1.83 billion [1]. - Zhongheng Electric (002364) closed at 27.67, up by 10.02% with a trading volume of 547,300 shares [1]. - Jinshi Technology (002951) closed at 15.29, up by 10.00% with a transaction value of 209 million [1]. Group 2: Capital Flow - The other power equipment sector saw a net inflow of 1.933 billion in main funds, while retail investors experienced a net outflow of 762 million [2]. - The capital flow for key stocks included: - Maigemit (002851) had a main fund net inflow of 460 million, but retail funds saw a net outflow of 189 million [3]. - Zhongheng Electric (002364) had a main fund net inflow of 401 million, with retail funds experiencing a net outflow of 210 million [3]. - Shanghai Electric (601727) recorded a main fund net inflow of 83.28 million, while retail funds had a net outflow of 21.53 million [3].

Core Viewpoint - Zhongheng Electric is benefiting from the increasing penetration of HVDC technology and overseas expansion, leading to significant performance growth [1] Group 1: Company Overview - Zhongheng Electric is a pioneer in the domestic HVDC supply solutions, having achieved iterations from 240V DC systems to integrated power modules in Panama [1] - The company is currently the market leader in the domestic HVDC industry [1] Group 2: Financial Projections - The projected net profit attributable to shareholders for the years 2025, 2026, and 2027 is expected to be 146 million, 285 million, and 512 million yuan respectively [1] - Corresponding price-to-earnings (PE) ratios for these years are forecasted to be 95.4, 48.7, and 27.2 times [1] Group 3: Market Position and Strategy - The company is consolidating its leading position in the HVDC field in China through technological and service advantages [1] - Zhongheng Electric is actively expanding its presence in the overseas HVDC market, which is expected to further improve its performance [1]

Market Performance - The three major indices strengthened again, with the Shanghai Composite Index rising by 0.53%, the Shenzhen Component Index increasing by 0.88%, and the ChiNext Index up by 0.77%. The STAR Market 50 Index rose by 0.9%. Over 3,900 stocks in the two markets were in the green, with a total trading volume reaching approximately 1.88 trillion yuan [2] AI and Liquid Cooling Sector - AI power and liquid cooling concept stocks led the gains, with Zhongheng Electric (002364.SZ) and Maigemeite (002851.SZ) both rising by 10%, and Oulutong (300870.SZ) increasing by over 9%. Haibosi Chuang (688411.SH) saw significant gains. According to a report from Western Securities, NVIDIA's GTC conference in 2025 revealed that orders for Blackwell and Rubin are estimated at around 14 million GPUs for the next five quarters, with the liquid cooling market size for NVIDIA projected to be conservatively/optimistically around $6.9 billion/$9.7 billion by 2026. The domestic liquid cooling market is expected to see high growth opportunities due to the rapid increase in the adoption of AI super node integrated systems [3] Commercial Aerospace Sector - The commercial aerospace sector experienced a resurgence, with Chaojie Co., Ltd. (301005.SZ) rising by 20%, Shenjian Co., Ltd. (002361.SZ) achieving five consecutive trading limits, and Aerospace Power (600343.SH) increasing by 10%. Aerospace Development (000547.SZ) rose by over 9% [4] IPO and Reusable Rockets - The China Securities Regulatory Commission disclosed that Blue Arrow Aerospace's IPO counseling work has been officially completed, with China International Capital Corporation as the counseling institution. Open Source Securities stated that the large-scale application of commercial aerospace heavily relies on low-cost, high-frequency launch capabilities, with reusable rockets being key. China's recoverable rockets have entered the engineering verification stage, with multiple rocket types, including Blue Arrow's Zhuque-3 and Long March 12甲, undergoing intensive test flights. It is expected that the next three years will see a phase of simultaneous launching and iteration in commercialization [5] Photovoltaic Sector - The photovoltaic sector showed strong fluctuations, with perovskite battery stocks leading the gains. Dongfang Risen (300118.SZ) rose by over 10%, Junda Co., Ltd. (002865.SZ) hit the daily limit of 10%, and Saiwu Technology (603212.SH) and Maiwei Co., Ltd. (300751.SZ) also saw increases. Analysts noted that perovskite batteries possess core advantages such as ultra-lightweight, low cost, high radiation resistance, and flexibility, making them a revolutionary solution to address energy bottlenecks in space and support the scaling of the space economy [5] Semiconductor Sector - Semiconductor concept stocks were active, with Huahai Chengke (688535.SH) rising by 12.88%, Demingli (001309.SZ) increasing by over 9%, and both SMIC (688981.SH) and Chipone (688521.SH) also seeing gains. Reports indicated that SMIC has implemented price increases on some production capacities, with an increase of about 10%. Additionally, NVIDIA has informed Chinese customers that it plans to deliver its second-ranked AI chip, H200, to them in mid-February next year [6] Declining Sectors - The precious metals, liquor, and insurance sectors weakened, with Western Gold (601069.SH), Kweichow Moutai (600519.SH), and New China Life Insurance (601336.SH) all experiencing declines [7]

Group 1: Aerospace and Defense Companies - Shenjian Co., Ltd. has seen a stock increase for five consecutive days, focusing on aerospace-related molds, metal parts, composite materials, and Beidou satellite navigation system terminal products [2] - Aerospace Engineering has experienced a stock rise for four days, being the only listed company under the Rocket Technology Research Institute of the Aerospace Science and Technology Corporation, specializing in gasification technology and key equipment [2] - Daye Co., Ltd. is investing in a joint venture that focuses on aerospace power systems and specialized pressure vessels, while also developing humanoid robot dexterous hands [2] - Zhongchao Holdings is a comprehensive cable supplier, providing high-temperature alloy precision castings for aerospace applications [2] - Boyun New Materials has developed carbon/carbon throat lining materials for the Kuaizhou series of commercial solid rockets, establishing itself as a core research base for solid rocket engine composite materials [2] Group 2: Satellite and Communication Technologies - Xinguang Yuda is engaged in information perception, satellite communication, and unmanned systems, reporting a net profit increase of 260% year-on-year in its third-quarter report [2] - Ruihua Tai has participated in multiple aerospace military projects, including the manned space station and launch vehicles, and is developing PI films to enhance the lifespan of satellites and spacecraft [3] - Guojiji Precision Engineering is a leading company in the aerospace bearing sector, having provided bearings for major projects like Chang'e and Long March rockets [3] - China Satellite is a leading domestic satellite manufacturer and a major provider for the Beidou system [3] Group 3: Emerging Technologies and Innovations - Jun Da Co., Ltd. has formed a strategic partnership with Shangyi Optoelectronics to explore the application of perovskite battery technology in space energy [3] - Tian Tong Co., Ltd. showcased its commercial satellite digital batch electrical assembly technology at a national conference, contributing to the supply chain of the aerospace information industry [6] - Yingli Automotive focuses on lightweight automotive components, including dashboard frames and EV battery housings, leveraging its Taiwanese background [5] Group 4: Investment and Expansion Plans - Jiufeng Energy is expanding its special fuel and gas supply project at the Hainan commercial space launch site, with an estimated total investment of approximately 300 million yuan [2] - Nanjing Panda's new satellite communication terminal project includes both hardware and software, supporting satellite communication between terminals [3] - The company has signed a strategic cooperation agreement with Galaxy Aerospace to enter the commercial aerospace sector [6]