Core Viewpoint - The recent share reduction announcement by China XD Electric (601179.SH) has caused significant market reactions, with the fifth largest shareholder, GE SMALLWORLD (SINGAPORE) PTE LTD, planning to reduce its stake by up to 154 million shares, potentially cashing out around 1.36 billion yuan [2][3]. Group 1: Shareholder Actions - GE SMALLWORLD plans to reduce its holdings, which represent 3% of China XD Electric's total shares, through centralized bidding and block trading between December 12, 2025, and March 11, 2026 [3][4]. - This is the third time GE SMALLWORLD has reduced its stake in the past year, indicating an accelerated exit strategy [5]. - The previous reductions occurred in 2024 and February 2025, with the first reducing 154 million shares for 1.22 billion yuan and the second reducing 102 million shares for 648 million yuan [5]. Group 2: Market Reactions - Following the announcement, China XD Electric's stock price dropped to 7.96 yuan, marking a weekly decline of 14.6% [3][6]. - The broader electric grid equipment sector also experienced a significant downturn, with the sector index falling 10% and many leading companies seeing stock price drops exceeding 10% [3][6]. Group 3: Industry Context - The timing of the share reduction comes after a substantial increase in stock prices, with the electric grid equipment index reaching a ten-year high earlier in November [3][7]. - Analysts suggest that the reduction signals a potential peak in valuation for both China XD Electric and the electric grid equipment sector, prompting a reassessment of the sector's valuation after a period of rapid growth [3][7]. - Despite the short-term volatility, the long-term growth prospects for the electric grid equipment industry remain strong, driven by the transition to a new power system and increased investments from state-owned enterprises [8][9].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [5][11]. Core Insights - The company reported a revenue of 8.45 billion RMB for the first half of 2025, representing a year-on-year increase of 37.8%, with a net profit of 1.29 billion RMB, up 45.7% year-on-year [2]. - The overseas demand remains strong, with a 49% year-on-year increase in transformer exports, and the company achieved a revenue of 2.86 billion RMB from overseas markets, up 88.9% year-on-year [3]. - The company is expected to exceed its 2025 operational targets, with a projected revenue of 18.5 billion RMB, a 20% increase year-on-year, and a net profit forecast of 2.75 billion RMB, up 34% year-on-year [4][5]. Summary by Sections Performance Review - In Q2 2025, the company achieved a revenue of 5.27 billion RMB, a 50.2% increase year-on-year, and a net profit of 0.85 billion RMB, up 61.5% year-on-year, aligning with expectations [2]. Operational Analysis - The domestic power grid investment reached 291.1 billion RMB in the first half of 2025, a 15% increase year-on-year, with significant growth in equipment bidding due to unexpected demand in the northwest power grid [3]. - The company has seen a substantial increase in its non-grid business, with new installations in wind and solar power reaching 51 GW and 212 GW respectively, representing year-on-year growth of 99% and 107% [3]. Profitability and Growth - The company's gross margin improved to 31.9%, a 0.2 percentage point increase year-on-year, driven by higher profitability from ultra-high voltage equipment and an increased share of overseas revenue [4]. - The automotive electronics business saw a remarkable revenue growth of 216.6% year-on-year in the first half of 2025, indicating the effectiveness of the company's second growth curve strategy [4]. Forecast and Valuation - The company is projected to achieve net profits of 2.75 billion RMB, 3.48 billion RMB, and 4.34 billion RMB for the years 2025, 2026, and 2027 respectively, with year-on-year growth rates of 34%, 27%, and 25% [5]. - The current stock price corresponds to a PE ratio of 25, 19, and 16 for the years 2025, 2026, and 2027 respectively, suggesting a favorable valuation [5].