Summary of Conference Call Records Industry Overview - The records focus on the **electric power industry** and **electric equipment sector** in both domestic (China) and international markets, particularly the **North American power system** [1][2][5]. Key Points and Arguments North American Power System Challenges - **Electricity Demand Growth**: The U.S. electricity demand growth has rebounded to **3%**, expected to continue until **2030**. Factors include AI infrastructure, cryptocurrency mining, and re-industrialization [2][5]. - **Supply-Side Issues**: A significant wave of power plant retirements is anticipated, with over **100 GW** expected to retire by **2034**, primarily coal-fired plants [2][3]. - **Reliability Concerns**: New renewable energy projects, mainly solar and storage, are less reliable under extreme weather conditions, exacerbating supply-demand imbalances [2][4]. - **Transmission Line Construction**: The long construction cycle (4-10 years) for transmission lines reveals system vulnerabilities, with an estimated average load gap of **30 GW** from **2025-2030** [2][4]. Measures Taken by U.S. Government and Enterprises - **Delaying Retirements**: The U.S. government is delaying the retirement of coal plants and promoting more reliable energy sources like gas and SOFC [3][4]. - **Infrastructure Projects**: Numerous transmission and transformation projects have been approved, but many remain in planning due to land and funding issues [4]. Investment Outlook - **Domestic Investment**: China is expected to invest over **4 trillion RMB** in the power grid during the **14th Five-Year Plan**, significantly higher than the previous plan [5]. - **International Market**: The U.S. market is experiencing a tight supply-demand relationship, leading to increased orders for transformers and other equipment [5][8]. Future Investment Trends - **Focus on Smart Distribution**: Future investments will prioritize the smart transformation of distribution networks, driven by the rise of electric vehicles and distributed energy [6][7]. - **Improving Industry Fundamentals**: Changes in bidding standards and pricing are expected to enhance product quality and improve order and profit outlooks for companies [6][7]. Electric Equipment Export Opportunities - **Strong Global Demand**: The global demand for electric equipment is robust, with Chinese companies benefiting from cost advantages and quick service response [8][9]. - **Export Growth**: From January to September **2025**, China's electric equipment exports grew by **24%**, with transformers up **42%** [8][9]. Performance of Major Overseas Manufacturers - **Strong Earnings**: Major overseas manufacturers like Hitachi Energy and GE have reported significant revenue growth, with expectations for stable long-term growth in demand [11][12]. - **Order Backlogs**: The backlog of orders remains high, indicating strong future demand, particularly in North America [11][12]. Recommendations for A-Share Market - **Key Companies**: Recommendations include companies like **Siyuan Electric** and **Samsung**, which are expected to perform well due to their current low valuations and potential for earnings growth [19]. Other Important Insights - **Market Dynamics**: The records highlight the competitive pressure from Chinese companies in the electric meter market, with foreign firms losing market share [17]. - **Valuation Trends**: High valuations for foreign stocks reflect optimism about long-term demand and performance [18]. This summary encapsulates the critical insights from the conference call records, focusing on the electric power industry and its dynamics in both domestic and international contexts.

Core Insights - The A-share market's power grid equipment sector surged by 12.45% in the first trading week of November, driven by the dual narratives of AI catalysis and energy transformation [1][2] - The sector's performance raises questions about the underlying earnings support and growth potential amid the AI-driven electricity demand surge [1] Market Performance - The Shenwan Power Grid Equipment Index rose by 12.46% over the week, reaching 5872.41 points, with a year-to-date increase of 43.11%, marking the highest level since June 2015 [2] - 16 stocks within the power grid equipment sector reached historical highs, with notable performers including Zhongneng Electric, Moen Electric, and Tebian Electric [2] Industry Dynamics - Since May, trading activity in the power grid equipment sector has increased, with the index showing seven consecutive months of gains, primarily due to AI-related electricity shortages [3] - The U.S. Energy Information Administration (EIA) predicts that electricity consumption will reach record highs in 2025 and 2026, driven by AI and data center expansion [3] - Goldman Sachs forecasts a 175% increase in global electricity demand from AI data centers by 2030 compared to 2023 [3] Investment Trends - The State Grid Corporation of China reported over 420 billion yuan in fixed asset investments from January to September, a year-on-year increase of 8.1% [3] - Major projects in high-voltage direct current (HVDC) engineering are underway, with total investments expected to exceed 650 billion yuan in 2025 [3] Financial Performance - The power grid equipment sector reported a revenue of 263.7 billion yuan and a net profit of 22.2 billion yuan in the first three quarters, reflecting year-on-year growth of 12% and 14%, respectively [4][5] - Significant performance disparities exist within the sector, with non-UHV main networks showing a net profit growth of 38.2%, while distribution and meter companies faced declines [5] Export Growth - China's transformer exports reached 6.22 billion USD from January to September, a 39% increase year-on-year, driven by demand from Europe and North America [5] - High-voltage switch exports also grew by 31.2%, with a notable monthly increase of 55.7% in September [5] Institutional Investment - Public fund holdings in the power grid equipment sector decreased slightly in the third quarter, with a total market value share of 0.6% [6] - Institutional investors are favoring companies with strong overseas demand and those involved in data center business growth, such as Siyuan Electric and Tebian Electric [6] Technological Advancements - Companies like Jinpan Technology are focusing on solid-state transformer (SST) technology, which is seen as a suitable solution for future energy demands [6][7] - Jinpan Technology has developed an SST prototype for HVDC applications, with plans for further testing and certification [7]

Core Viewpoint - The A-share market's power grid equipment sector has surged, driven by the dual narratives of artificial intelligence (AI) catalysis and energy transformation, with a notable 12.45% increase in the first trading week of November, highlighting the sector's potential amidst concerns over actual performance support and growth potential [3][4]. Market Performance - The Shenwan Power Grid Equipment Index rose by 12.46% in the week, reaching 5872.41 points, with a year-to-date increase of 43.11%, marking the highest level since June 2015 [4]. - The average increase for 137 stocks in the power grid equipment sector was 8.8%, with several companies, including TBEA Co., Ltd. and Jinpan Technology, hitting historical highs [4]. AI and Power Demand - The surge in the power grid equipment sector is largely attributed to the "power hunger" driven by AI, particularly in data centers, with the U.S. Energy Information Administration (EIA) predicting record-high electricity consumption in 2025 and 2026 [5]. - Goldman Sachs forecasts that AI data centers will increase global electricity demand by 175% by 2030 compared to 2023 [5]. Investment Trends - The National Grid's fixed asset investment exceeded 420 billion yuan from January to September, a year-on-year increase of 8.1%, with expectations for total investment to surpass 650 billion yuan in 2025 [5]. - The "14th Five-Year Plan" emphasizes the importance of new energy systems, advocating for accelerated construction of smart grids and microgrids [5]. Financial Performance - In the first three quarters, 42 key companies in the power grid equipment sector reported revenues of 263.7 billion yuan, a 12% year-on-year increase, and a net profit of 22.2 billion yuan, up 14% [7]. - The net profit growth rates for different segments varied significantly, with non-UHV main networks leading at 38.2%, while distribution and meter companies faced declines of -23.6% and -28.4%, respectively [7]. Institutional Holdings - Public funds slightly reduced their holdings in the power grid equipment sector in Q3, with the sector accounting for 0.6% of total holdings, down 0.6 percentage points year-on-year [8]. - Institutions favored companies with overseas expansion and those involved in data center business growth, such as Siyi Electric and TBEA [8]. Emerging Technologies - Institutions are increasingly researching solid-state transformer (SST) developments, which are seen as optimal solutions for data center power needs due to their smaller size and better adaptability to renewable energy grids [9]. - Jinpan Technology has developed an SST prototype suitable for high-voltage direct current (HVDC) applications, with plans for further testing and certification [9].

Investment Rating - The industry rating for power equipment and renewable energy is maintained at "Overweight" [5] Core Insights - The performance of the power grid equipment sector in Q3 shows significant differentiation, with non-UHV main networks outperforming UHV main networks, distribution, and electric meters [1] - The export logic remains strong, particularly for transformers and other primary equipment, with a notable increase in orders and revenue [2] - The gross margin in the distribution and electric meter segments is under pressure, but overseas expansion is enhancing profitability quality [3] Summary by Sections Q3 Performance Overview - Non-UHV main networks, UHV main networks, distribution, and electric meters showed revenue growth rates of 38.2%, 5.2%, -23.6%, and -28.4% respectively [1] - The non-UHV main network's strong performance is attributed to high demand for overseas expansion and robust domestic main network construction needs [1] - Distribution segment companies are facing challenges due to domestic price reductions and weakening demand from new energy and industrial sectors [1] Export Trends - From January to September, China's transformer exports reached $6.22 billion, a 39% year-on-year increase, with September alone seeing a 47% increase [2] - High-voltage switch exports also grew by 31.2% year-on-year during the same period [2] Gross Margin Analysis - The distribution and electric meter segments are experiencing noticeable gross margin declines due to price reductions and low-priced orders being fulfilled [3] - Companies like Siyuan Electric and Kehua Tech have seen gross margin improvements driven by higher overseas revenue contributions [3] - The overall expense ratio has shown a downward trend, indicating cost control efforts among companies [3] Profit Forecast Adjustments - Profit forecasts for Siyuan Electric in the non-UHV segment have been raised for 2025 and 2026, while forecasts for several companies in the UHV segment have been lowered [4][10] - Specific adjustments include a decrease in profit predictions for China XD Electric and Pinggao Electric, reflecting market conditions [4][10]

Group 1: Infrastructure Market Opportunities - Chinese companies are concerned about entering overseas infrastructure markets, but there are opportunities if they meet local demands and standards [1] - Major economies are significantly increasing government spending, with a portion directed towards infrastructure construction, presenting a market for Chinese enterprises [1] - The global power grid is experiencing a new wave of investment, with a market space worth several hundred billion; European grid companies are expected to invest an average of €26.7 billion annually from 2024 to 2026, a 61% increase from 2023 [1] - Exports of electrical equipment from China have seen rapid growth, with export amounts exceeding $44.1 billion, a 20% year-on-year increase [1] Group 2: Real Estate and Waste Management Opportunities - The overseas real estate market presents new opportunities due to a shortage of housing in major economies, contrasting with the limited new construction in the domestic market [2][3] - California faces a housing shortage of 3.5 million units, indicating a significant demand for housing [3] - The waste management industry also offers market opportunities, with over 2,000 waste-to-energy plants globally; Chinese companies can consider expanding their business overseas due to domestic waste management challenges [3] Group 3: Strategic Recommendations for Chinese Companies - Companies should strengthen cooperation with local stakeholders and share development benefits [4] - A shift in mindset is necessary; companies should not compare overseas costs with domestic costs, as competition occurs among overseas factories [4] - The overseas market is characterized by high premiums rather than being cost-driven, suggesting greater profit potential despite higher labor costs [5]

Core Insights - The overall performance of the dividend style sector has been poor from early 2025 to October 28, 2025, while electricity demand has maintained steady growth, with a total electricity consumption of 7.77 trillion kilowatt-hours, representing a year-on-year increase of 4.8% [2][3] - During the 14th Five-Year Plan period, a "wide electricity volume, tight electricity supply" pattern is expected, with comprehensive electricity prices likely to stabilize [2][3] Electricity Sector - Coal prices have bottomed out and are expected to stabilize electricity prices; from the end of 2023 to mid-2025, coal prices have been declining, but began to rebound in July 2025, with the average clearing price in Jiangsu's electricity market reaching 395.60 yuan per megawatt-hour, an increase of 82.80 yuan per megawatt-hour month-on-month [3] - Hydropower remains stable with long-term investment value in a low-interest-rate environment; the net interest margin for hydropower has expanded by 69 basis points compared to the previous year [3] - Nuclear power's marketization ratio is gradually increasing, with a marketable electricity volume cap of 31.2 billion kilowatt-hours in 2026, a 14.3% increase from 2025; fluctuations in natural uranium prices have a minimal impact on operators [3] - Green electricity policies have seen uncertainty resolved, with market reforms entering a deeper phase; the wind power tax subsidy has decreased, indicating a policy bottom [4] Power Grid Equipment - The State Grid's investment in transmission and transformation equipment has seen significant growth, with a cumulative bidding amount of 68.188 billion yuan from January to September 2025, a year-on-year increase of 22.9% [6] - The export of primary equipment has also maintained high growth, with liquid medium transformers, high-voltage switches, and energy meters showing significant year-on-year increases in export amounts [6] Investment Opportunities - Beneficial stocks include: - Thermal Power: Huaneng International, Huadian International, China Resources Power, Datang Power, and others [7] - Hydropower: Yangtze Power, Huaneng Hydropower, and others [7] - Nuclear Power: China National Nuclear Power, China General Nuclear Power, and others [7] - Green Power: Longyuan Power, China Power, and others [7] - Power Grid Equipment: Pinggao Electric, XJ Electric, and others [7]

Group 1 - The core viewpoint highlights the robust growth in the power equipment sector, with the fourth batch of ultra-high voltage bidding exceeding 15 billion yuan and a year-on-year increase of 28% in power equipment exports in September [1] - Transformer and high-voltage switch exports saw significant year-on-year increases of 46% and 56% respectively, indicating sustained long-term high demand from overseas markets [1] - The wind power industry aims for an annual new installed capacity of no less than 120 GW during the 14th Five-Year Plan period, although the large-scale development of the industry is slowing down [1] Group 2 - Leading companies in the wind power sector are launching new products that align with the market's demand for electricity [1] - Hydrogen energy has officially entered the national future industry framework, with policies expected to support an industrialization process that may exceed expectations, focusing on green hydrogen, ammonia, and fuel cells as key directions [1] - The New Energy Vehicle ETF (159806) tracks the CS New Energy Vehicle Index (399976), which selects 50 listed companies involved in the new energy vehicle supply chain, covering core areas such as lithium batteries, charging piles, and new energy vehicles [1]

Macro Strategy - The GDP growth rate remains resilient, with an expectation to achieve the annual growth target of 5% [1][22] - In Q3, GDP grew by 4.8% year-on-year, while cumulative growth for the first three quarters was 5.2% [22] - Industrial added value in September increased by 6.5% year-on-year, exceeding expectations [22] - External demand outperformed expectations with exports growing by 8.3% year-on-year, while internal demand continued to face pressure [22] Fixed Income Market - The bond market remains strong amid ongoing Sino-US trade tensions, but short-term participation is advised with caution [3] - The yield curve has steepened since the "anti-involution" policy was introduced in July 2025, with the 10-1Y spread at 38 basis points, indicating limited downward momentum [3] - The recommendation is to shift positions from 30Y to 10Y bonds to mitigate duration risk while maintaining a balanced approach [3] Company Analysis Fuyao Glass (600660) - The Q3 performance met expectations, with adjustments to net profit forecasts for 2025-2027 [7] - The revised net profit estimates are 97.10 billion, 111.11 billion, and 131.74 billion yuan for 2025, 2026, and 2027 respectively, with corresponding EPS of 3.72, 4.26, and 5.05 yuan [7] Chuangfeng Power (603129) - The company reported a year-on-year net profit increase of 11% in Q3, driven by strong demand for all-terrain vehicles [8] - The net profit forecasts for 2025-2027 are maintained at 18.7 billion, 24.7 billion, and 27.4 billion yuan respectively [8] Sien Electric (002028) - The company exceeded market expectations with a Q3 revenue of 53.3 billion yuan, up 26% year-on-year, and a net profit of 8.99 billion yuan, up 49% [9] - The international market's high demand is expected to continue driving profitability [9] Longjin Environmental Protection (600388) - The company reported a 20.5% year-on-year increase in performance for the first three quarters, with significant contributions from green electricity and energy storage [20][21] Hikvision (002415) - The company achieved a net profit of 93.19 billion yuan in Q3, a 14.94% year-on-year increase, with a focus on AI and overseas growth [16][17] Hanwujing (688256) - The company reported a Q3 revenue growth of 1333%, with a net profit of 16.05 billion yuan [18] - The product ecosystem is expanding, supporting various AI applications across multiple industries [18]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company's Q3 2025 performance exceeded market expectations, with revenue of 5.33 billion yuan, a year-on-year increase of 26%, and a net profit attributable to shareholders of 899 million yuan, up 49% year-on-year [8] - The overseas market is experiencing high demand, leading to a sequential improvement in the company's profitability, with expectations of maintaining over 50% of overseas orders for the year [8] - The domestic market remains stable, with significant growth potential in the energy storage sector, where the company has secured approximately 2.4 GWh of orders, ranking among the top 10 in the country [8] Financial Forecasts - Total revenue is projected to reach 12.46 billion yuan in 2023, increasing to 34.67 billion yuan by 2027, representing a compound annual growth rate (CAGR) of 25.36% [1] - Net profit attributable to shareholders is expected to grow from 1.56 billion yuan in 2023 to 5.28 billion yuan in 2027, with a CAGR of 29.81% [1] - The latest diluted EPS is forecasted to rise from 2.00 yuan in 2023 to 6.76 yuan in 2027, reflecting strong earnings growth [1] Market Position and Strategy - The company has solidified its market share in the domestic grid sector, benefiting from breakthroughs in 750kV GIS equipment, with a total bid amount of 4.773 billion yuan in the first four batches of state grid tenders, an increase of 84% year-on-year [8] - The company is diversifying its market presence, with expectations of robust growth in the energy storage business, supported by strong downstream demand [8] - Increased investment in market expansion has led to a significant rise in inventory and contract liabilities, indicating a solid foundation for continued growth [8]

Core Viewpoint - Changgao Electric New Technology Co., Ltd. has responded in detail to the Shenzhen Stock Exchange's inquiry regarding its application for issuing convertible bonds, addressing key issues such as business dependence and fundraising projects, which has attracted market attention [1] Customer Dependence and Response Strategy - The main business of Changgao Electric New includes power transmission and transformation equipment, as well as power survey design and engineering contracting services, with power transmission and transformation equipment being the core business. Sales revenue from State Grid and its subsidiaries accounted for over 85% during the reporting period. The company believes this high customer concentration aligns with industry characteristics, as the downstream market primarily consists of the power grid construction sector, where State Grid holds a significant market share. The investment plans and bidding policies of State Grid are stable, with total investments planned by State Grid and Southern Grid exceeding 825 billion yuan from 2022 to 2025 [2] - To mitigate potential performance volatility risks, the company has developed response strategies across three dimensions: product, technology, and market. In terms of products, it aims to expand its product line through three fundraising projects to cover all voltage levels and smart products. Technologically, it continues to increase investment in R&D and quality control. In the market dimension, it seeks to deepen multi-level market development, optimize customer structure, and actively expand customers outside the State Grid system [2] Profit Margin Analysis of Power Transmission and Transformation Equipment - From 2022 to 2024, the gross profit margins of Changgao Electric New's medium and high-voltage switches, closed combined electrical appliances, and complete electrical appliances showed an overall upward trend, with some fluctuations in the first half of 2025. Factors driving this include product structure optimization, State Grid policies driving price increases, declining raw material prices, and cost dilution from economies of scale. For example, the gross profit margin of closed combined electrical appliances increased from 2022 to 2024 due to price increases, economies of scale, and declining raw material prices, while it declined in the first half of 2025 mainly due to delivery cycles and raw material price changes. The gross profit margin of complete electrical appliances improved due to the growth of main product margins and an increase in the proportion of high-margin products, while it declined in the first half of 2025 due to procurement policy adjustments. The gross profit margin of high-voltage switch products overall increased due to the combined effects of raw material prices, product structure, and State Grid policies. Compared to peer companies, the trend of gross profit margin changes for Changgao Electric New is generally consistent, and future gross profit margin levels are expected to remain stable [3] Accounts Receivable and Goodwill Situation - As of March 31, 2025, Changgao Electric New had accounts receivable of 80.93 million yuan, other receivables of 514.25 thousand yuan, and contract assets of 19.19 million yuan from Chunhua Zhonglue Wind Power Co., Ltd. that have not been recovered. The 80MW wind power project meets the conditions for inclusion in the subsidy project list but has not yet been declared, and the electricity price subsidy has not been implemented. If the project is subsequently included in the subsidy project list and receives the electricity price subsidy, the related receivables will not face recovery risks; otherwise, there may be risks, but the company has made corresponding provisions for bad debts, which will have a minimal impact on performance and ongoing operations. Other similar projects do not face similar risks, and the receivables do not belong to non-operating fund occupation by related parties, with effective internal control measures in place [4] - The company assesses accounts receivable credit risk characteristics to make provisions for bad debts, with a higher overall provision ratio for accounts receivable over five years compared to China West Electric, aligning closely with the average of comparable companies. The provision for bad debts is deemed sufficient and reasonable. The book value of goodwill is 65.41 million yuan, arising from the acquisition of Hunan Changgao Electric Co., Ltd. and Hunan Changgao Senyuan Power Equipment Co., Ltd. Both companies have performed well during the reporting period, and goodwill impairment testing has shown that the relevant parameters and assumptions are reasonable, with no impairment occurring, making the lack of goodwill impairment provisions reasonable [5] Fundraising Project Details - On May 16, 2025, the board of directors of Changgao Electric New approved an increase in fundraising, which does not directly apply to the provisions of the "Securities and Futures Legal Application Opinion No. 18" but has followed internal review procedures. The fundraising projects involve multiple entities and are deemed reasonable, with the fundraising products aligning with the main business of the implementing entities, allowing for separate and accurate accounting of investments and benefits. The newly added product, mutual inductors, is closely related to existing products in terms of raw materials, technology, and customers. The company has mastered the key technologies for mutual inductors and possesses the capability for mass production and sales, with no significant uncertainties in the implementation of the fundraising projects. The fundraising will be directed towards the main business, ensuring self-control over mutual inductors, reducing costs, and enriching the product matrix. The scale of new production capacity from the fundraising projects has been cautiously evaluated, considering State Grid's centralized procurement policies, industry development, and competition, with minimal risks of being unable to digest the new capacity through State Grid's centralized procurement. The existing production capacity utilization rate was low in the first quarter due to seasonal and production mode impacts but significantly improved in the second quarter, with no idle risks for existing capacity and no impairment risks for related fixed assets. The pricing basis for each fundraising product is reasonable, with some products expected to have gross profit margins higher than similar products during the reporting period, which is deemed reasonable. The new depreciation and amortization from the fundraising projects will increase in the short term but is not expected to have a significant adverse impact on the company's performance [8][9]