Summary of Conference Call Notes Industry Overview - The conference call discusses the **Chinese power grid industry**, specifically focusing on the **State Grid Corporation of China** and its investment plans during the **15th Five-Year Plan (FYP)** period from **2026 to 2030**. [1][3] Key Points and Arguments 1. **Investment Targets**: The State Grid aims for a fixed-asset investment of **Rmb 4 trillion** during the 15th FYP, a **40% increase** from the **Rmb 2.8 trillion** during the 14th FYP. This indicates an annual investment of at least **Rmb 800 billion**, translating to a **CAGR of at least 6%**. [1][8] 2. **Growth Segments**: The **Ultra High Voltage (UHV)** segment is expected to grow the fastest at **24% year-on-year** in **2026E**. Investments will shift towards smart grid infrastructure from **2028E to 2030E** due to the increasing share of renewable energy. [2] 3. **Distribution vs. Transmission**: Over the 2026E-2030E period, distribution investments are projected to grow faster than transmission, increasing its contribution to total investment from **57% to 59%**. [2] 4. **Power Transmission Capacity**: The State Grid plans to enhance cross-regional and cross-provincial power transmission capacity by over **30%** compared to the end of the 14th FYP. [3] 5. **Renewable Energy Integration**: By **2030**, renewable energy is expected to account for approximately **30%** of total power generation, supporting the integration of up to **900 GW** of distributable renewable energy capacity. [7] 6. **Market Dynamics**: The competition landscape shows market share consolidation among top players like **Sieyuan**, **Pinggao**, and **TBEA**. [10][29] Additional Important Insights - **Investment Trends**: In **2025**, the disclosed grid investment reached **Rmb 560.4 billion**, marking a **6% year-on-year** increase, with expectations of achieving **11% year-on-year** by year-end. [10][12] - **Equipment Tendering**: Transmission equipment tendering grew by **26% year-on-year** in 2025, with primary equipment at **27%** and secondary equipment at **20%**. However, UHV equipment tendering declined by **12% year-on-year** due to fewer new lines starting construction. [10][14][22] - **Future Expectations**: Five new UHV lines are expected to start construction in **2026E**, with UHV investments anticipated to peak in **2027E**. [25] - **Consolidation in Product Categories**: There is noted consolidation in product categories such as **GIS**, **disconnectors**, and **power transformers**, with significant market shares held by leading companies. [29] This summary encapsulates the critical insights from the conference call regarding the Chinese power grid industry, highlighting investment plans, growth segments, and market dynamics.

Summary of Conference Call Notes Industry Overview - The conference call discusses the **China Industrial Technology** sector, focusing on companies involved in PCB, energy storage systems (ESS), consumer electronics, and industrial automation. Key Highlights 1. **3Q25 Results**: - Overall results were mostly in-line with sector averages showing revenue and operating profit growth of **+18%** and **+17%** year-over-year respectively [1] - Notable performance from major domestic PCB customers driven by AI applications, particularly from **Hans Laser** [1] - Growth in capital expenditures (capex) for batteries and consumer electronics [1] - Resilient market share gains in the industrial automation (IA) segment, particularly for **Inovance** [1] 2. **Challenges Faced**: - Smaller players like **Pony Testing** and **HCFA** struggled with scaling and profitability [1] - Prolonged capex weakness in process automation markets such as steel and chemicals affected companies like **Baosight** and **Supcon** [1] - Temporary delays in defense orders impacted **AVIC Jonhon**, alongside high exposure to precious metals leading to margin deterioration [1] 3. **Margin Trends**: - Smaller players are more vulnerable in a deflationary environment with average selling price (ASP) pressures [2] - **AVIC Jonhon** faced margin deterioration due to precious metal price hikes [2] - Larger companies like **Sanhua** achieved margin beats through stringent SG&A cost control [2] - **Kstar** reported a gross profit margin (GPM) increase of over **3 percentage points** in its ESS segment due to a favorable product mix [2] Actionable Investment Ideas 1. **Buy Recommendations**: - **Hans Laser**: Strong demand in PCB and consumer electronics, with a **+96%** year-over-year growth in 3Q25 [3] - **Kstar**: Positive outlook with diversified customer base and robust ESS pipeline [3] - **Inovance**: Resilient momentum in industrial automation [3] - **Nari Tech** and **Centre Testing**: Defensive plays with stable margins [3] 2. **Sell Recommendations**: - **Raycus**: Limited military end-market sales [3] - **Baosight**: Continued weakness in domestic steel industry capex [3] - **Sanhua-A**: Potential profit-taking pressure due to overly optimistic market expectations [3] Sector Focus Areas 1. **AI Demand**: - **Hans Laser** is experiencing strong growth in PCB equipment sales due to capex expansion from key suppliers like **Victory Giant** for NVIDIA [6] - **Kstar** anticipates higher year-over-year sales growth in data center products driven by domestic and overseas orders [6] 2. **Energy Storage**: - **Sungrow** expects **40%-50%** global ESS installation growth in 2026, driven by renewable energy needs and market-driven policies in China [7] - **Kstar** aims to double its ESS sales growth in 2025, optimistic about demand outlook [7] 3. **Consumer Electronics**: - **OPT** anticipates stronger demand due to shifts in product form factors, particularly with Apple's upcoming products [8] - **Hans Laser** benefits from solid demand for iPhone 17 and next-generation smartphones [8] 4. **Overseas Expansion**: - **Hongfa** holds a dominant market share in HVDC relays and plans to expand capacity in Germany and Indonesia [10] - **Inovance** is also expanding overseas to support sales growth [10] Conclusion The China Industrial Technology sector shows a mix of strong growth opportunities, particularly in AI and energy storage, while facing challenges from smaller players and specific market weaknesses. Investment strategies should focus on larger, resilient companies with strong growth prospects while being cautious of smaller firms facing profitability issues.