2026-02-02 02:22Summary of Key Points from the Conference Call Industry Overview - The focus is on the grid and electrical equipment sector, particularly in the context of global investment trends and structural demand drivers across regions including China, ASEAN, the US, and the EU [2][3][10]. Core Insights and Arguments - Structural Upcycle: Analysts believe the current upcycle in grid equipment is structural rather than cyclical, supported by high manufacturing utilization and multi-year order visibility across APAC [3][10]. - Investment Needs: Global grid investment reached approximately $450 billion in 2025, but this is still below the estimated $1 trillion needed annually by 2050 to meet demand [4]. - Aging Infrastructure: About 45% of global grid assets are over 20 years old, with significant replacement needs emerging, particularly in the US where the average transformer is around 40 years old [4][10]. - OEM Backlogs: Equipment suppliers are experiencing unprecedented demand, with average selling prices for transformers increasing by approximately 75% since 2019, and high-voltage cable costs nearly doubling [5][10]. Regional Developments - China: The 15th Five-Year Plan mandates a record investment of RMB 4 trillion by 2030, a 40% increase from previous plans, focusing on high-voltage expansion to support renewable energy [7]. - ASEAN: Leaders have agreed to accelerate the ASEAN Power Grid, aiming to double cross-border capacity by 2040, supported by an $800 billion financing initiative [7]. - US: Federal programs, including a $65 billion grid modernization fund, are pushing utilities to enhance and expand networks [7]. - Europe: The European Commission has introduced a new Grid Package requiring €584 billion in transmission investment by 2030 [7]. Capacity and Constraints - Manufacturing capacity for grid equipment is tight across APAC, with Japan operating at nearly 100% utilization. Expansion plans are in place, but skilled labor shortages and input constraints remain significant challenges [12]. - Orderbooks are strong, particularly in Korea, where companies report 30% year-over-year growth in orderbooks, with lead times extending to 3-4 years [13]. Pricing Dynamics - Anticipated price increases in China due to potential tariff adjustments in the 2026 regulatory cycle are expected to support average selling price hikes and margin expansion [14]. - Japan's Hitachi aims to increase EBITDA margins from 13-15% to 16-20% by FY30, indicating a focus on disciplined pricing and higher-value products [14]. Demand Drivers - Demand is driven by a multi-year structural grid upgrade cycle across APAC, with significant needs for replacement and modernization of aging infrastructure, as well as the integration of digital automation and smart grid technologies [15][16]. Investment Recommendations - Companies positioned at the core of structural grid equipment demands, such as NARI Technology, Hitachi, and Hyundai Electric, are highlighted as key beneficiaries of the ongoing investment cycle [18][19]. - NARI Technology is particularly noted for its alignment with China's domestic grid investment priorities, with expectations of sustained pricing uplift and market share gains [18]. Conclusion - The combination of aging infrastructure, rising demand from renewable energy, and the need for modernization and digitalization in grid systems suggests a robust growth outlook for the grid equipment sector across APAC, with favorable pricing power and earnings durability anticipated [10][11].