Zhongyin Securities released a research report stating that concerning wind power, the construction of domestic offshore wind projects is progressing in an orderly manner. Overseas offshore wind power, represented by Europe, is expected to enter a phase of rapid growth from 2025 onwards, gradually taking over domestic demand, driving continuous growth in the wind power industry chain. It is recommended to prioritize the allocation of tower, pile foundation with double logic of offshore wind and overseas, as well as submarine cables. Furthermore, attention should be given to the main network components of ultra-high voltage whose prosperities are expected to benefit, together with components that have the logic of penetration and new technologies that promote domestication. Concerning electric power equipment, the construction and renovation needs of domestic and overseas power grids are resonating; the prosperity of main network investment is maintained at a high level of prosperity; the demand for electric power equipment to be exported overseas is good. It is recommended to focus on the related targets of main network components that benefit from ultra-high voltage and prosperity and on variable power distribution components with overseas logistics. The rating maintains that industry is stronger than the big market.

The main points of BOC International are as follows:

"On-sea + overseas" demand injects continuous growth momentum into the wind power industry.

Concerning the domestic market, the "Thousand Villages and Towns Harnessing Wind Plan" and the policy of opening up red lines of absorption are expected to secure steady and robust growth of new energy installed capacity demand; it is estimated that the total newly added domestic installed capacity in 2024-2025 will respectively reach 88GW, 97GW, with a year-on-year growth rate of 15.94%, 10.23%. The new wind power generators connected to the grid and the bidding data in the first half of 2024 maintain a relatively high level, providing good support for this judgment. By the same token, under the guidance of the "Fourteenth Five-Year Plan" of each province, it is expected that the newly added offshore wind capacity will respectively reach 8GW, 12GW in 2024-2025, and it is worth looking forward to the start of many projects and biddings in the latter half of the year. Overseas markets, represented by Europe, are expected to enter a phase of rapid growth from 2025 onwards, creating market space for our country's zero component export.

The global capacity of subsea pile foundations and submarine cables is regionally differentiated, and domestic capacity may overflow to supply the world.

In the context of the rapid increase of offshore wind power overseas, there may be a shortage of offshore pile foundations and subsea cable supply and demand. Considering the potential uncertainty of subsequent overseas capacity expansion, GWEC predicts that from 2026 onwards, multiple overseas markets, represented by Europe and North America, may experience a potential gap in fixed pile foundation capacity; concerning the submarine cables, China's regions have formed the world's leading capacity scale, with the potential for export to areas with short supply of capacity in the subsequent period. At present, the head enterprises represented by Dajin Heavy Industry, Orient Wires & Cables, Jiangsu Zhongtian Technology and others have gradually received overseas orders in bulk, and offshore demand may become the second growth curve of domestic suppliers.

Domestic main network investment has high prosperity and is expected to continue.

In recent two years, the investment amount of power grid engineering has increased steadily and significantly, and the high prosperity of main network construction is expected to continue; at the same time, the "Notice on Doing a Good Job in the Absorption of New Energy and Guaranteeing the High-quality Development of New Energy" clearly proposes to speed up the construction of new energy supporting power grid projects in order to promote the construction of ultra-high voltage and main network within 2024. Two of the three ultra-flexible DC transmission projects which included 2 switches and 3 direct currents will start running in 2024, marking a large-scale application of technology, and flexible and direct conversion valves with significantly improved values will be more beneficial.

Domestic and overseas demands resonate, driving the good outlook of electric power equipment going overseas.

To match the Energy demand growth, various regions and countries in the world have invested heavily to support transmission and distribution grid construction, with capital expenditures and classified order of public utilities overseas and orders of domestic electric power equipment enterprises showing sustained growth trends, China's customs export data and corporate income structure have gradually verified overseas logistics. Relevant electric power equipment targets going overseas are likely to benefit.

Investment advice

Concerning wind power, the construction of domestic offshore wind projects is progressing in an orderly manner. During the "Fourteenth Five-Year Plan", a high compounded growth rate is expected to be maintained. Overseas offshore wind, represented by Europe, is expected to enter a phase of rapid growth from 2025 onwards; overseas demands may take over domestic demands, driving continuous growth in the wind power industry chain. It is recommended to give priority to the allocation of tower, pile foundation with double logic of offshore wind and overseas, as well as submarine cables. Furthermore, attention should be paid to the logic of production penetration and new technologies that facilitate domestication.

As for electric power equipment, the implementation of the reform of the power system continues in China with the "Notice on Doing a Good Job in the Absorption of New Energy and Guaranteeing the High-quality Development of New Energy" being released, which is expected to promote the speedy construction of ultra-high voltage and main grid, driving the sustained demand of relevant electric power equipment; the demand for overseas power grid rebuilding is high. It is recommended to focus on the related targets of main network components that benefit from ultra-high voltage and prosperity and on variable power distribution components with overseas logistics.

The major risks that the rating faces are: price competition exceeding expectations; adverse fluctuations in raw material prices; risks of international trade friction; policies not meeting expectations; absorption risks; investment growth rate slipping; and large-scale cost reduction expectations not meeting expectations.