Core Viewpoint - The report from CICC highlights that Shuangdeng Co., Ltd. (06960) is a leading player in the domestic communication and data center energy storage market, serving major domestic cloud service providers (CSPs) and key overseas power equipment manufacturers. The initial coverage gives an "outperform" rating with a target price of HKD 22.90 [1]. Industry Insights - The energy storage market has significant growth potential, driven by declining battery costs and supportive policies, leading to rapid global development. The demand for data center energy storage, including backup power and regulation storage, is expected to be released quickly due to increased capital expenditure in computing power [2]. - The power storage sector is entering an upward cycle, with improved economics for independent storage in China and overseas energy structure transformations. The supply-demand relationship is expected to reach a turning point in Q3 2025, with leading energy cell manufacturers facing supply shortages, benefiting mid-tier manufacturers through order overflow and improved utilization rates [2]. Company Positioning - The company's energy storage business focuses on data center scenarios, positioning itself with leading domestic CSPs and major overseas power manufacturers. According to Frost & Sullivan, it is projected to hold the top market share in backup power for data centers in both domestic and global markets by 2024. The establishment of overseas factories is expected to enhance the company's growth potential [2]. - The market perceives the company's overseas progress as slow; however, it has already entered the overseas supply chain and positioned itself with key customers, indicating substantial future growth potential. Potential catalysts include continued unexpected increases in capital expenditure from terminal CSPs and ongoing progress in orders from mainstream CSPs both domestically and internationally [3]. Financial Projections - The company is projected to have an EPS of RMB 0.65 and RMB 1.29 for 2025 and 2026, respectively, with a CAGR of 24.8% from 2024 to 2026. The current stock price corresponds to a 10.1x P/E for 2026, while the target P/E is set at 16.0x, leading to a target price of HKD 22.90, representing a 58.0% upside potential, with an initial coverage rating of "outperform" [4].

Investment Highlights - Company initiates coverage on Shuangdeng Co., Ltd. (06960) with an "outperform" rating and a target price of HKD 22.90, based on a P/E valuation method corresponding to a 16.0X P/E for 2026 [1] - The energy storage market has significant growth potential, driven by the increasing capital expenditure in global computing power and the declining costs of energy storage batteries, alongside supportive policies [1] - The demand for data center energy storage, including backup power and regulation storage, is expected to be rapidly released due to increased capital spending in global computing power [1] Industry Outlook - The power storage sector is entering an upward cycle, with a turning point in supply and demand expected in Q3 2025, as domestic independent energy storage economics improve and overseas energy structure transformations and policy subsidies drive demand [1] - The supply-demand relationship is anticipated to improve, leading to a recovery in energy storage cell prices [1] Company Strategy - The company's energy storage business focuses on data center scenarios, positioning itself with leading domestic CSP manufacturers and top overseas power supply manufacturers, aiming for a leading market share in backup power for data centers in 2024 [2] - The company is optimistic about its international expansion through overseas factories, which will open up growth opportunities [2] - The company has already entered the overseas supply chain and positioned itself with key customers, contrary to market perceptions of slow overseas progress [2] Earnings Forecast and Valuation - The company forecasts EPS of RMB 0.65 and RMB 1.29 for 2025 and 2026, respectively, with a CAGR of 24.8% from 2024 to 2026 [2] - The current stock price corresponds to a 10.1x P/E for 2026, while the company is assigned a 16.0x P/E, leading to a target price of HKD 22.90, indicating a potential upside of 58.0% [2]

Investment Rating - The report maintains an "Overweight" rating for the electronic industry [5]. Core Insights - Domestic capital expenditure on computing power is expected to accelerate, driven by the continuous iteration of AI large models, which supports confidence in hardware investment [2][3]. - Alibaba plans to invest over 380 billion yuan in cloud and AI hardware infrastructure over the next three years, surpassing the total of the past decade, marking the largest investment by a private enterprise in this sector in China [3][4]. - The global cloud infrastructure service expenditure is projected to grow by 20% year-on-year in Q4 2024, reaching 86 billion USD, with AI model expansion being a key driver [4][30]. Market Performance - The Shenwan Electronics Industry Index rose by 6.96% from February 17 to 21, outperforming the CSI 300 Index by 5.96% [1][10]. - In the same period, sub-sectors such as digital chip design and semiconductor equipment showed strong performance, with respective increases of 9.82% and 9.26% [17][20]. Capital Expenditure Trends - The CAGR for capital expenditure among the four major overseas cloud providers is expected to reach 50.6% from 2023 to 2025 [4][29]. - Domestic cloud providers are anticipated to follow suit in enhancing their cloud and AI hardware infrastructure, potentially matching the rapid growth rates of foreign counterparts [30]. Investment Opportunities - The report suggests focusing on AI-driven demand and domestic substitution logic within the AI industry chain and related consumer electronics, highlighting companies such as Haiguang Information, Zhongke Shuguang, and others [5]. - It also emphasizes the potential for investment in domestic computing power chips, AI servers, and advanced process wafer foundries due to increasing AI demand [30].