Summary of Conference Call on Power Equipment Industry Industry Overview - The power equipment industry is experiencing a recovery in bidding for distribution networks, with significant approvals for ultra-high voltage (UHV) projects and strong overseas demand [1][2] Key Points and Arguments Price and Profitability Trends - The second batch of regional joint procurement bidding results show a month-on-month increase in prices: 10 kV transformers up by 5.5%, integrated ring network boxes up by 0.2%, and pole-mounted circuit breakers up by 3.8% [3] - Expected recovery in gross margins: 10 kV transformers' gross margin is projected to rise from 15% to 19%-20%, and integrated equipment's gross margin from 20% to 25% [3] Future Investment Trends - From 2027, significant acceleration in grid investment is anticipated, focusing on upgrading distribution networks, enhancing low-voltage interconnections, and improving distributed photovoltaic capacity [4] Ultra-High Voltage (UHV) Construction - The approval process for UHV lines is speeding up, with expectations to approve 3 direct current and 4 alternating current UHV lines in 2025, and a preliminary plan for 20 direct and 20-25 alternating current UHV lines during the 14th Five-Year Plan [5] Company Performance Expectations Major Companies in the UHV Sector - China XD Electric expects UHV revenue to exceed 3.1 billion yuan in 2025, with a doubling growth rate and holding approximately 8.5 billion yuan in UHV orders [9] - Pinggao Electric anticipates a net profit growth of around 20% with a current valuation of over 17 times [7] - State Grid NARI's net profit growth is expected to be around 10% with a valuation of about 20 times [10] Performance of Other Key Players - Synchronous Electric: Net profit growth of approximately 15% with a valuation of around 19 times [11] - China XD Electric: Overall net profit growth of about 15% with a valuation of 32 times [11] North American Market Demand - The North American market shows strong demand for power equipment, particularly in data centers, with Eaton reporting a 70% year-on-year increase in new orders and a 40% revenue growth [12] - There is a significant supply-demand gap, with demand for transformers above 110 kV exceeding supply by 30% and for 10 kV and 35 kV distribution transformers exceeding supply by 10% [12] Opportunities in Overseas Markets - Overseas markets, including North America, Latin America, Saudi Arabia, Europe, and Africa, present substantial opportunities for Chinese companies due to high demand for transformers and grid upgrades [13] - Companies like Siyi Electric and Huaming Equipment are capitalizing on these opportunities, with significant contracts won in various regions [14][15] Valuation of Major Chinese Companies - Valuations of key companies targeting overseas markets are as follows: Siyi Electric at approximately 29 times, Samsung Medical at 17-18 times, Huaming Equipment at 27 times, and others showing potential for significant performance growth [16]

Fixed Income - The number of new industrial bond issuers has significantly increased, with 133 new issuers in 2024 and 191 from January 1 to August 26, 2025 [2][8] - New issuers are primarily concentrated in lower administrative levels, with over half rated AA+, and the majority located in economically strong provinces like Shandong, Jiangsu, Guangdong, and Zhejiang [9][10] - Investment strategy suggests focusing on newly issued bonds from industries with better economic conditions, such as social services, and considering city investment subsidiaries due to their relatively controllable credit risks [10] Overseas/Education Research - Market sentiment around interest rate cuts remains volatile, with short to medium-term bond yields declining while 30-year Treasury yields are rising, indicating investor concerns about long-term risks [16] - The weak dollar has contributed to the rise in precious metals, with gold nearing new highs [16] Automotive Industry - In high-income markets, the willingness to pay for Robotaxi services is stronger than for traditional ride-hailing services, with Waymo users prioritizing safety over price [19] - Domestic markets may still view Robotaxi as a substitute for traditional taxis, while international markets see it as a premium service [19] - The technology for Robotaxi is converging with passenger vehicles, and significant attention is on Tesla's upcoming V14 version and its public deployment [19] Transportation - The company achieved revenue of 84.68 billion yuan in H1 2025, a 6.19% increase year-on-year, with container business volume and pricing supporting performance [22] - The company is expanding its global port network and enhancing competitiveness in domestic container business [22] Machinery/Construction - The company reported a revenue of 7.75 billion yuan in H1 2025, a 19.99% increase year-on-year, with a notable Q2 growth due to project completions [25] - The gross margin improved to 27.40%, and the company is actively repurchasing shares, reflecting confidence in future business development [26][27] Pharmaceuticals - The company achieved a revenue of 19.49 billion yuan in H1 2025, with a 1.11% year-on-year increase, driven by steady growth in its hemorrhoid treatment products [38] - The company is focusing on optimizing its distribution network and enhancing brand marketing to support growth in its healthcare segment [39] Electronic Industry - The company reported a revenue of 52.18 billion yuan in H1 2025, a 9.62% increase year-on-year, with high utilization rates in Q2 [5] - The product matrix is expanding, particularly in automotive electronics and AI servers, contributing to overall growth [5]

Core Insights - The company reported a revenue of 3.455 billion yuan for the first half of 2025, representing a year-on-year growth of 20.58%, and a net profit attributable to shareholders of 601 million yuan, which is a 41.55% increase compared to the same period last year [1] Industry Demand Expansion - The demand side is driven by policies promoting the replacement of old products, stimulating consumption in electronics and industrial sectors, as well as automotive electronics and AI, which are generating new growth [2] - The company is positioned as a leading power enterprise in China, with its "YJ" brand targeting domestic and Asia-Pacific markets, while the "MCC" brand focuses on Europe and the U.S., achieving global market channel coverage [2] Product Line Expansion and Brand Strengthening - The company is one of the few large-scale enterprises in China that integrates the entire vertical industry chain from monocrystalline silicon wafer manufacturing to chip design, packaging, testing, and terminal sales [3] - The company is increasing its investment in the third-generation semiconductor chip industry, particularly in SiC-based power devices, and has completed sample deliveries to multiple automotive clients, gaining testing and cooperation intentions from several Tier 1 and end vehicle manufacturers [3] - The company has developed a full range of IGBT chips based on a Fabless model, achieving mass shipments of its entire series to clients [3] Investment Outlook - Revenue projections for the company are 7.421 billion yuan, 8.905 billion yuan, and 10.686 billion yuan for 2025, 2026, and 2027 respectively, with net profits of 1.276 billion yuan, 1.493 billion yuan, and 1.748 billion yuan for the same years [4] - The company is assigned a target price of 70.49 yuan based on a 30x PE ratio for 2025, maintaining a "Buy-A" investment rating [4]