2025-10-31 00:59Summary of Key Points from the Conference Call Industry Overview - The report focuses on the China Energy Transition and the power market in China, projecting a significant increase in power demand growth to 8% by 2028-30E, which is double the previous estimate of 4% [2][3][15]. Core Insights and Arguments - Power Demand Growth Drivers: - The forecast of 8% power demand growth is driven by three main structural factors: 1. AI Infrastructure: Expected to contribute 2.3 percentage points (ppt) to growth, up from 0.5ppt previously [3][14][16]. 2. Exports: Contribution raised from 0ppt to 1.4ppt, with a long-term export growth assumption of 4% annually [3][24]. 3. Electrification: Increased contribution from 0.6ppt to 1.2ppt, driven by the adoption of electric vehicles (EVs) and power-intensive manufacturing [3][27]. - Investment and Capacity Forecast: - The 15th Five-Year Plan capacity addition target is revised up by 14% to 438GW, with significant increases in thermal (from 32GW to 61GW), wind (from 105GW to 128GW), and nuclear (from 12GW to 16GW) approvals [4][35][39][41]. - Earnings Upgrades: - Earnings per share (EPS) forecasts for preferred companies are raised by 2-18% for 2025-27E, reflecting stronger volumes and improved pricing [5][47]. Stock Recommendations - Upgrades: - Dajin and CGN Power upgraded from Neutral to Buy due to stronger volume growth and improved margin forecasts [5][9]. - Top Picks: - Harbin Electric and CGN Power are highlighted as top investment choices, along with Dongfang, Sieyuan, Yingliu, Goldwind, and Dajin [2][9]. Additional Important Insights - Valuation Metrics: - Preferred stocks are trading at 15.6x 2026E PE, below historical averages of 22x and 21x during previous high growth cycles [2][9]. - Market Dynamics: - Despite a 116% YTD rally, the current valuations do not fully reflect the anticipated demand upcycle, indicating potential for re-rating as consensus aligns with the 8% demand growth thesis [2][9][54]. - Grid Capex: - Grid capital expenditure (capex) growth is expected to accelerate to 9% CAGR for 2025-30E, reflecting the need to connect additional power supply to demand [47][48]. Conclusion - The report presents a bullish outlook on China's power market, driven by structural changes in demand from AI, exports, and electrification, alongside significant upgrades in capacity and earnings forecasts for key players in the industry. The anticipated demand growth and necessary investments in infrastructure suggest a favorable environment for power equipment and independent power producers (IPPs) moving forward.