1. Report Industry Investment Rating - The report does not mention the industry investment rating. 2. Core Viewpoints of the Report - Huachen Convertible Bond's underlying stock has a small market value, and the strong overseas demand for transformers is expected to drive the continuous expansion of the company's medium - and long - term transformer export orders, thereby supporting the gradual increase of the company's performance. The underlying stock and the convertible bond are relatively scarce high - growth assets in the market [1][10]. - The Chinese transformer industry has experienced a strong development process from steady growth to accelerated take - off in the past decade, and the growth is highly resonant with the global energy transition and grid investment wave. The export value has entered a stage of rapid growth since 2021, and the growth momentum is increasing year by year [2][34]. - The business focus of Jiangsu Huachen has shifted from traditional transformer products to box - type substations, which has become the most important growth driver [21]. - The global grid investment is in an upward period, and the demand for transformers is surging. The export structure of Chinese transformers is becoming more high - end, and value growth has become the core engine [34]. 3. Summary According to the Directory 3.1 Convertible Bond Basic Information - As of January 27, 2026, the remaining balance of Huachen Convertible Bond is 460 million yuan, with a credit rating of A+ by United Credit Rating Co., Ltd. The face value is 100 yuan, and the coupon rates from the first to the sixth year are 0.20%, 0.40%, 0.80%, 1.50%, 2.00%, and 2.50% respectively. The redemption price at maturity is 114% of the face value (including the last - period interest). The conversion period is from December 26, 2025, to June 20, 2031 [1][10]. - In 2025, after October, the underlying stock of Huachen Convertible Bond fluctuated upwards, driving up the convertible bond price. In 2026, the convertible bond valuation may increase compared with 2025. When the conversion value is in the range of 120 - 140 yuan, the premium rate of Huachen Convertible Bond in 2026 has increased compared with 2025. After January 2026, as the conversion value of the convertible bond further increased, the convertible bond premium rate decreased [10]. 3.2 Growth Power of the Domestic Transformer Export Track 3.2.1 Historical Evolution - Jiangsu Huachen was established on September 4, 2007, and was successfully listed on the main board of the Shanghai Stock Exchange in May 2022. It focuses on the R & D, manufacturing, and system integration of high - end power transmission and distribution facilities, and its products are widely used in various fields [17]. - The company has won many honors and launched several projects over the years, such as being recognized as a national high - tech enterprise in 2014 and starting the new - energy intelligent box - type substation and electrical complete equipment project in 2021 [17]. 3.2.2 The Company's Scale is Continuously Expanding, and the Main Business is Shifting to Box - Type Substations - The company's operating income has shown a stable growth trend. From 2018 - 2020, it was in a slow - growth period. Since 2021, it has entered a high - speed growth channel. In 2023, the year - on - year growth was as high as 47.40%. In 2024, the growth rate suddenly slowed down to 4.69%. In the first three quarters of 2025, the operating income reached 1.443 billion yuan, a year - on - year increase of 37.46%, indicating a new round of strong growth [18]. - The company's net profit attributable to the parent also showed fluctuations. In 2024, the profit shrank due to factors such as the increase in the proportion of box - type substation business and increased R & D expenses. In the first three quarters of 2025, the net profit attributable to the parent was 72 million yuan, a year - on - year increase of 15.41%, showing a steady recovery of profitability [19]. - The company's business focus has shifted from traditional transformers to box - type substations. The revenue of dry - type transformers has increased steadily, but its proportion has decreased. The box - type substation business has achieved rapid growth and has become the largest business [21]. - The company has good cost control, but the profit margin has declined due to the change in product structure. The sales gross profit margin has decreased from about 29% in 2019 - 2020 to 16.99% in Q1 - Q3 of 2025, and the sales net profit margin has decreased from 12.14% in 2020 to 4.99% in 2025 [26]. 3.3 The Global Grid Investment is in an Upward Period, and the Transformer Demand is Surging 3.3.1 Export Structure Upgrading, and Value Growth Becoming the Core Engine - The Chinese transformer industry's export value increased from 2.844 billion US dollars in 2016 - 2020 to 3.264 billion US dollars, with a 9.5% growth in 2018 and a 2.1% decline in 2020. Since 2021, it has entered a stage of rapid growth, reaching 9.036 billion US dollars in 2025, nearly 2.5 times the scale in 2021, with an increasing growth momentum [2][34]. - The core driving force for the rapid growth of China's transformer exports after 2021 is value upgrading rather than quantity expansion. The export quantity decreased in 2021 - 2023, but the export value increased significantly, indicating a shift in the growth driver from quantity to unit - product value [35]. 3.3.2 Asia's Basic Market is Stable, and Europe and the Middle East Lead High - Growth - In 2025, the export value of Chinese transformers to all regional markets increased. Asia's export value reached 4.496 billion US dollars, a year - on - year increase of 37.9%, and its proportion in the global total increased from 47.5% in 2023 to 49.8%. Europe's export value increased from 1.292 billion US dollars in 2024 to 1.837 billion US dollars, a year - on - year increase of 42.2%, and its proportion rebounded to 20.3%. North America's export value increased to 1.324 billion US dollars, with a relatively moderate growth rate of 23.4%, and its proportion decreased from 16.0% in 2024 to 14.6%. Africa's export value was 790 million US dollars, a year - on - year increase of 39.6%, showing strong growth potential [3][39]. - The Middle East market, represented by Saudi Arabia, has a strong demand for transformers. The export value to Saudi Arabia increased from almost negligible 5 million US dollars in 2021 to 998 million US dollars in 2025, a year - on - year increase of 134.2%. The demand comes from national - level transformation strategies and emerging fields [44]. - The European market's demand for transformers is mainly due to the rigid replacement demand of aging grid facilities and the energy transition strategy. The export value in 2025 reached 1.837 billion US dollars, a year - on - year increase of 42.2%, and the scale has expanded more than three times in four years [45]. - The US market's growth is limited. In 2025, the export value was 782 million US dollars, a year - on - year increase of 20.4%. Non - market factors such as trade policies have restricted the growth of imports from China [46]. 3.3.3 Strong Domestic Policy Support and Continuous Release of Transformer Market Demand - Driven by the "dual - carbon" goal and high - quality development, the domestic transformer industry is in a strategic opportunity period. The national grid will increase grid investment during the "15th Five - Year Plan" period, with an expected fixed - asset investment of 4 trillion yuan, a 40% increase compared with the "14th Five - Year Plan" period [50]. - The approval and construction of UHV projects have accelerated, providing long - term and certain project reserves for high - end UHV transformers. Industrial policies and standards have optimized the market structure and created new growth space [50]. - The implementation of energy - efficiency improvement and energy - saving replacement policies, such as the new "Energy Efficiency Limits and Energy Efficiency Grades for Power Transformers" and tax incentives for first - level energy - efficiency transformers, promotes the transformation of the industry to high - added - value [51]. - The demand for transformers in the domestic market is driven by multiple factors, including the construction of large - scale data centers for AI, the development of new - energy power stations, the intelligent upgrading of the power grid, and the popularization of electric vehicles and charging infrastructure [54][55]. 3.3.4 The Oil - Immersed Transformer Market has a Large Scale and Strong Overseas Demand - In 2025, the market scale of oil - immersed transformers was about 11.82 billion US dollars, much higher than that of dry - type transformers (6.75 billion US dollars). Although the compound annual growth rate of the oil - immersed transformer market in the next ten years is predicted to be only 3.02%, lower than that of the dry - type market (6.51%), it will still have a larger market scale than dry - type transformers by 2035 [56]. - Oil - immersed transformers have advantages in high - voltage and large - capacity power conversion scenarios, such as high dielectric strength, good heat - dissipation ability, high environmental adaptability, and low full - life - cycle cost. They are widely used in power grids, new - energy power stations, and heavy - industry factories [60]. - The overseas market has a high demand for oil - immersed transformers because their technical advantages match the core overseas needs. Jiangsu Huachen's oil - immersed transformer business has shown a high - volatility growth trend, and its sales proportion has been maintained between 20% - 40%. The business revenue has increased significantly in some years, indicating the company's technical and delivery capabilities [61][62].