Core Viewpoint - The company is focusing on developing intelligent and high-voltage direct current (HVDC) circuit breaker products to meet the demands of new energy generation, energy storage, electric vehicle charging, and data center applications. Group 1: Intelligent Development - The company has achieved digital upgrades of its existing products and plans to integrate IoT and AI algorithms to enhance capabilities from precise sensing and proactive warning to autonomous decision-making [1] - This development aims to provide a comprehensive digital operation and maintenance solution covering the entire lifecycle of equipment, transitioning from "passive protection" to "active intelligent control" [1] Group 2: High-Voltage Direct Current Focus - Traditional circuit breakers are inadequate for the rapid, arc-free, and reliable interruption required in direct current systems [1] - The company is committed to developing high-reliability and high-response direct current circuit breaker products to adapt to the application scenarios of new energy generation, energy storage, electric vehicle charging, and data centers [1] - This initiative represents a shift from AC dominance to a fusion of AC and DC systems [1]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 35.70 RMB [7][5]. Core Views - The company is expected to continue its stable growth in the domestic power grid secondary equipment industry, with significant breakthroughs in external business [1]. - The solid-state transformer (SST) technology is leading in the domestic market and is anticipated to create new profit growth points in the data center sector [4]. - The company’s overall profitability is projected to remain upward, supported by its advanced technology and successful benchmark cases [5]. Summary by Sections Financial Performance - In Q3 2025, the company achieved revenue of 2.11 billion RMB, a year-over-year increase of 30.65% and a quarter-over-quarter decrease of 3.69% [1]. - For the first three quarters of 2025, the company reported revenue of 6.13 billion RMB, a year-over-year increase of 20.39%, and a net profit of 704 million RMB, up 15.57% year-over-year [2]. Profitability Metrics - The gross margin for Q1-Q3 2025 was 30.77%, down 2.93 percentage points year-over-year, while the net margin was 11.47%, down 0.51 percentage points year-over-year [2]. - The company’s overall expense ratio for Q1-Q3 2025 was 17.64%, a decrease of 2.54 percentage points year-over-year [2]. Technology and Market Position - The company offers a range of SST products with high efficiency (up to 99%) and reliability (99.99%), positioning it as a key player in the data center power distribution system [4]. - The company is one of the few in China capable of providing critical equipment and solutions for both AC and DC power distribution systems in data centers [4]. Earnings Forecast and Valuation - The company’s projected net profits for 2025-2027 are 844.93 million RMB, 987.86 million RMB, and 1.15 billion RMB, respectively, with a compound annual growth rate of 17.14% [5]. - The report assigns a 30x PE ratio for 2026, reflecting the company’s leading SST technology and growth potential in the AIDC business [5].

Summary of Sifang Co., Ltd. Conference Call Company Overview - **Company**: Sifang Co., Ltd. - **Industry**: Power Automation and New Energy Key Financial Performance - **Revenue**: 40.2 billion CNY in H1 2025, a year-on-year increase of 15.6% [3] - **Net Profit**: 4.76 billion CNY, a year-on-year increase of 12.4% [3] - **Earnings Per Share**: Increased by approximately 12% [2][3] - **Overall Performance**: Financial results align with annual performance expectations, driven by adjustments in delivery schedules [3] Business Segment Performance - **Grid Automation**: Revenue growth of 2.25% [4] - **Power Plant and Industrial Automation**: Growth exceeding 30% [4] - **New Energy Sector**: Growth rate of 55% [2][4] - **International Business**: Rapid growth but lower gross margins, leading to a decline in overall gross margin by about 3 percentage points [2][5] Contract and Market Developments - **New Contracts**: New contract value increased by approximately 15% year-on-year [6] - **Grid Contracts**: Main network and distribution contracts grew by 15% and 20%, respectively [6] - **New Energy Contracts**: Increased by about 30% [6] - **International Contracts**: Growth of 60%-70% year-on-year [6] - **National Grid Bidding**: Significant growth in bidding scale by 50%, with cumulative winning amount increasing by 60% [7] - **Southern Grid Bidding**: Improved winning amounts and rankings [7] Technological Advancements - **Transformer-less Power Supply Solutions**: Supports output from 240V to 800V with efficiency exceeding 98% [15] - **Solid-State Transformer (SST)**: High efficiency achieved through solid-state technology, with testing showing efficiency up to 99.7% in 2023 [15][16] - **Data Center Solutions**: Transitioning to direct current (DC) networking for data centers, with a comprehensive solution proposed [18] International Market Strategy - **Expansion**: Actively expanding international business through projects in India and other countries, including participation in the world's largest photovoltaic project [14][39] - **Contract Growth**: Nearly 70% growth in overseas contracts in H1 2025, including a significant solar-storage project in the Philippines valued at $70 million [38] Challenges and Future Outlook - **Gross Margin Fluctuations**: Variability in gross margin due to the structure of revenue recognition and the scale of different product categories [40] - **SST Commercialization**: Anticipated challenges in scaling SST production, with potential for cost reduction through mass production [27] - **Traditional Energy Sources**: Stable but limited growth in hydropower and thermal power, currently accounting for about 7%-8% of total business [34] Conclusion Sifang Co., Ltd. demonstrates strong growth in various sectors, particularly in new energy and international markets. The company is leveraging technological advancements to enhance efficiency and expand its market presence, while also navigating challenges related to gross margins and the commercialization of solid-state transformers.

Investment Rating - The report maintains an "Overweight" rating for the electric equipment and new energy industry [2] Core Viewpoints - The report suggests focusing on the new energy storage segment, highlighting the need for system-friendly new energy power plants to address the instability of renewable energy output [2][39] - The report emphasizes the importance of enhancing the predictive accuracy of wind and solar power generation to improve grid integration [39] - It recommends paying attention to leading inverter companies that benefit from the development of new energy storage technologies [39] Market Review - As of August 28, 2025, the electric equipment industry has increased by 6.08% over the past two weeks, underperforming the CSI 300 index by 0.88 percentage points, ranking 9th among 31 industries [11] - The electric equipment industry has risen by 11.88% this month, outperforming the CSI 300 index by 2.35 percentage points, ranking 7th [11] - Year-to-date, the electric equipment sector has increased by 15.01%, outperforming the CSI 300 index by 1.56 percentage points, ranking 16th [11] Valuation and Industry Data - As of August 28, 2025, the PE (TTM) for the electric equipment sector is 28.32 times, with sub-sectors showing varied valuations: - Electric motor II: 57.18 times - Other power equipment II: 54.33 times - Photovoltaic equipment: 21.08 times - Wind power equipment: 35.53 times - Battery: 27.20 times - Grid equipment: 26.13 times [22][25] Industry News - The report discusses the Chinese government's initiatives to promote green and low-carbon urban development, emphasizing energy efficiency and the adoption of advanced technologies [35] - It highlights the National Energy Administration's focus on enhancing the adaptability of the power system to renewable energy, including the construction of a new power system and the promotion of energy storage solutions [36] Company Announcements - The report includes recent financial performance announcements from various companies, such as: - GreenMe achieved a revenue of 17.56 billion yuan in the first half of 2025, a year-on-year increase of 1.28% [41] - XianDai Intelligent reported a revenue of 6.61 billion yuan, up 14.92% year-on-year [41] - Euro Continental's revenue reached 2.12 billion yuan, reflecting a growth of 32.59% [41]

Investment Rating - The report maintains an "Overweight" rating for the electric power equipment and new energy industry, expecting the industry index to outperform the market index by over 10% in the next six months [2][43]. Core Insights - The electric power equipment industry has shown strong performance, with a 5.47% increase over the past two weeks, outperforming the CSI 300 index by 3.07 percentage points, ranking 5th among 31 industries [10][11]. - The report highlights the positive performance of companies like Jinlang Technology, which reported a 13.09% increase in revenue and a 70.96% increase in net profit year-on-year for the first half of 2025, driven by the growth in demand for medium and high-power inverter products and energy storage series products [35][37]. - The report suggests focusing on leading inverter companies benefiting from the development of new energy storage technologies [35]. Market Review - As of August 14, 2025, the electric power equipment sector has increased by 8.42% year-to-date, outperforming the CSI 300 index by 2.36 percentage points, ranking 20th among 31 industries [10][11]. - The wind power equipment sector rose by 7.17%, the photovoltaic equipment sector by 4.91%, and the battery sector by 5.45% in the last two weeks [15][16]. Valuation and Industry Data - As of August 14, 2025, the electric power equipment sector's PE (TTM) is 27.02 times, with sub-sectors showing varied valuations: electric motor II at 54.17 times, photovoltaic equipment at 19.85 times, and wind power equipment at 33.38 times [21][24]. - The report provides a detailed breakdown of the valuation metrics for various sub-sectors, indicating a general upward trend in valuations compared to historical averages [24][25]. Company Announcements - Jinlang Technology's strong performance is attributed to increased market demand and product innovation, with significant growth in both revenue and net profit reported for the second quarter of 2025 [35][37]. - Other companies such as Dongfang Cable and Kelu Electronics also reported varying performance metrics, with some showing significant revenue growth while others faced declines in net profit [37]. Industry News - Recent developments include the approval of large-scale independent energy storage projects in Inner Mongolia and adjustments to the registration of polysilicon futures brands, indicating ongoing investment and regulatory activity in the sector [32].

Core Viewpoint - The growth in AI computing power is creating new revenue opportunities for the company's IDC direct current products, particularly in the data center market [1] Group 1: Company Strategy - The company plans to maintain strong R&D collaboration with major clients to enhance product reliability and stability [1] - The company has prepared adequately for the increasing applications of direct current circuit breakers in renewable energy, energy storage, and charging stations [1] Group 2: Product Development - The company has launched a new generation of direct current contactors designed to meet the stringent requirements of energy storage systems [1] - Continuous investment will be made to enhance product competitiveness in the market [1]

Group 1: Financial Performance - The main reasons for the decline in Q4 profits include a 2% decrease in gross margin due to a shift in revenue structure, with increased contributions from lower-margin new energy business and a decline in high-margin real estate revenue [1] - Increased management expenses due to more fixed asset projects in the Haiyan Park, leading to higher depreciation costs [1] - Increased marketing and R&D expenses as the company invests in new product development and customer engagement [1] Group 2: Market Trends and Strategies - The company believes that R&D investment is crucial for long-term development, despite short-term profit impacts, aiming to enhance product competitiveness and customer satisfaction [1] - The company is focusing on sectors such as new energy, digital energy, smart buildings, and infrastructure for future growth, with expectations of pressure on building business due to market conditions [2] - The largest segment within the new energy business unit is photovoltaic, followed by energy storage and wind energy, with expectations of improved overall gross margin as high-margin segments grow [2] Group 3: Competitive Positioning - The company aims to replace foreign brands in the data center sector by leveraging its product reliability and stability, while also enhancing its offerings in the renewable energy sector [2] - The company is preparing to increase investments in the development of direct current circuit breakers, particularly for energy storage applications [2] Group 4: Supply Chain and Cost Management - Rising prices of raw materials are expected to impact gross margins, with the company planning to manage costs through early procurement and potential cost pass-through to downstream customers [3] Group 5: International Strategy - The company is restructuring its overseas business strategy, focusing on Southeast Asia, South Korea, Europe, and North America, with plans for differentiated market expansion based on local conditions [2] - The company is pursuing UL certification for high-demand products to enter the North American market and enhance its export business [2]