Summary of Key Takeaways from the Conference Call on Asia Electrical Equipment Industry Overview - The focus of the conference call was on the Asian power grid equipment and energy storage system (ESS) sectors, particularly in Singapore [1] Company Insights Transformer Makers - Investors showed more interest in LS Electric, Sieyuan Electric, TBEA, and Chung Hsin Electric due to more attractive valuations compared to Hyundai Electric and Fortune Electric [1] - LS Electric is expected to receive new orders from Amazon Web Services (AWS) for US datacenters, reflecting its strong track record [2] - PRC transformer makers, particularly Sieyuan and TBEA, reported significant growth in overseas orders, with Sieyuan's export revenue increasing by 89% year-over-year in 1H25 and TBEA's new orders from abroad rising by 88% year-over-year [2] Quality Comparison - Hyundai Electric indicated that the failure rate for Korean transformers is 0.01%, while for Chinese transformers it is 0.03%, suggesting a slight quality advantage for Korean products [3] Production Cost Analysis - Production costs for high voltage transformers in Korea are 65% of those in the US, while costs in China are estimated to be 10-20% lower than in Korea [6] Market Dynamics PRC Power Grid Capex - PRC power grid capital expenditure (capex) growth was revised down to 8-9% year-over-year for 2025, from a previous estimate of 13%, due to slower-than-expected approvals for new projects [7] Impact of US Legislation on ESS - The US "One Big Beautiful Bill" will affect Sungrow's ESS business by disqualifying projects using Chinese equipment from receiving a 30% investment tax credit. Sungrow plans to mitigate this by sourcing batteries from South Korea and Japan and offering price discounts for US sales [8] Company Valuations Chung Hsin Electric - Target price set at NT$200 based on a 21x 2026E EPS, supported by strong order backlog from Taipower's grid upgrade projects [9] LS Electric - Target price of W560,000/share based on a DCF model, reflecting stable cash flows in the power grid equipment industry [11] Sieyuan Electric - Target price of Rmb170.00/share based on a DCF model, with stable cash flows expected [13] Sungrow Power Supply - Target price of Rmb240.00 based on a DCF valuation, with a focus on long-term potential returns [15] TBEA Co - Target price of Rmb26.00/share derived from a DCF model, with stable cash flows anticipated [18] Risks Chung Hsin Electric - Risks include slower-than-expected sales growth, budget cuts on power grid upgrades, operational accidents, and weaker macro fundamentals [10] LS Electric - Key risks include lower-than-expected overseas new orders, higher tariffs, and rising raw material costs [12] Sieyuan Electric - Risks involve lower-than-expected PRC grid capex, overseas new orders, and raw material costs [14] Sungrow Power Supply - Risks include slower solar installation growth, lower ESS demand, and intensified trade tensions affecting exports [17] TBEA Co - Risks include lower polysilicon prices, higher prices for key materials, and reduced transformer demand [19]

Investment Rating - The report assigns an "Overweight" (OW) rating to several companies, including Huaming Equipment, Xuji Electric, and Goldcup Electric, indicating a positive outlook for their performance [7][18]. Core Insights - Chinese power equipment companies are experiencing significant overseas market share gains, with Huaming projecting over 30-35% revenue growth from international markets and Sanxing Medical reporting a 38% year-over-year increase in overseas revenue [2][4]. - The demand for power equipment is strong from both developed markets (DMs) like the US and EU, as well as emerging markets (EMs), with companies like Huaming and Sanxing planning to establish manufacturing facilities abroad to mitigate geopolitical risks [2][4]. - Local manufacturers are gradually increasing their market share in the data center sector, although foreign companies still dominate due to their established reputations for quality [6][4]. Summary by Sections Overseas Market Expansion - Huaming anticipates continued tightness in high voltage transformer supply, benefiting tap changer manufacturers, and expects overseas revenue growth of approximately 30-35% [4]. - Sanxing Medical Electric has seen a 38% increase in overseas revenue and a 27% growth in order backlog, with significant new orders for advanced metering infrastructure (AMI) [4][5]. Competitive Advantages of Chinese Manufacturers - Chinese manufacturers like Huaming stand out due to shorter lead times (4-6 weeks compared to over 12 months for competitors) and significantly lower average selling prices (ASP) [4][5]. - High levels of automation in manufacturing processes, with Sanxing achieving around 90% automation in its power meter plants, enhance efficiency and competitiveness [5]. Data Center Equipment Demand - Liangxin Electrical is witnessing rising demand for its products in the data center sector, although foreign brands still dominate due to their reliability [6]. - The company is optimistic about increasing acceptance of local products among state-owned enterprises (SOEs), which could lead to greater market share for domestic manufacturers [6]. Domestic Demand for Power Equipment - Huaming is optimistic about domestic demand for tap changers, projecting over 10% revenue growth, while Sanxing acknowledges competitive pressures in the domestic market [6]. - Liangxin Electrical expects a 20% revenue growth overall, driven by strong demand from the renewable energy sector and data centers, despite caution regarding the property sector [6].