Deeply involved in the transmission, distribution and control equipment industry, and accelerate layout in multiple scenarios

The company has benefited from Mingyang Group's platform resources and has developed into a leading domestic power transmission, distribution and control equipment. Its main products include box-type substations, complete switchgear and transformers. We expect the downstream capacity of wind and solar storage to continue to expand, data centers will contribute new volume, and power grid investment will grow steadily. The company has entered the leading customer tender list. The business focuses on new energy and new infrastructure, and is expected to continue to accurately benefit from the high downstream boom. At the same time, the accelerated development of seafreeze, haiguang, and overseas business is expected to bring profit growth. We expect the company's 2024-2026 EPS to be 1.99/2.56/3.15 yuan, respectively. Comparable to the company's 2024 Wind's consensus average PE of 21 times. Considering the company's remarkable technical advantages, the ocean wind booster system is expected to achieve import substitution. The indirect offshore and global layout is expected to contribute to flexible performance. The company is 23 times PE in 2024, corresponding to a target price of 45.8 yuan, giving it a “buy” rating.

Benefiting from the boom in new energy and new infrastructure, the company led the market share in the landscape sector, accounting for 83% of new energy related products in 23 years, and the boom in wind storage drives an increase in demand for supporting transformers. We expect the domestic wind storage sector transformer market to reach 36/39.69 billion yuan in 24-25, an increase of 4%/10% over the previous year. The company's market share of box-type substations and transformers in the field of wind power and photovoltaics in 2022 was 27%/15%, which is expected to accurately benefit from the high downstream boom. The domestic data center market continues to grow rapidly. It is expected to reach 304.8 billion yuan in 24, an increase of 27%. The company has stable cooperation with well-known customers and is expected to meet incremental demand. Investment in power grids is expected to grow steadily, and demand for main grid expansion and upgrade and distribution network transformation continues to be released. The company's 110/220 kV main transformer products and 110 kV GIS have been shipped in small quantities, and 252 kV GIS has begun to be put on the market, which is expected to achieve a breakthrough.

Leading technology in the offshore scene, which is expected to achieve import substitution

Overseas brands such as ABB, Siemens, and SGB mainly include overseas brands such as ABB, Siemens, and SGB. Overseas brands accounted for 90%/76% of the market share of offshore special transformers/offshore medium voltage equipment in 2021. The company's offshore dry-type transformers and offshore wind power inflatable medium voltage switch cabinets have better performance than imported products, and the price is 7%-23% lower than imported brands. The equipment delivery cycle and after-sales service are faster, and it is expected that import substitution can be achieved. The company independently developed a 66kV prefabricated intelligent offshore boosting system and 72.5kV environmentally friendly gas-insulated switchgear to increase the fan capacity to 8-12MW. Based on its R&D experience in the field of sea breeze, the company launched a booster system solution suitable for the sea light scenario and won the bid for the world's first GW grade sea light project.

There is a shortage of overseas transformers, and the mismatch between the supply and demand of overseas transformers with indirect overseas going+global layout has brought opportunities for domestic manufacturers to go overseas. The company established a two-wheel drive strategy with indirect overseas and global layout. On the one hand, it cooperated with leading domestic new energy companies such as Sunshine Power, Mingyang Intelligence, and Shangneng Electric, and on the other hand, actively promoted global product certification. It has obtained certification from a series of domestic and foreign authorities such as China's CQC, US UL, EU CE, and European DNV-GL certification.

Risk warning: Domestic landscape reserves fall short of expectations, production capacity expansion falls short of expectations, order expansion for sea breeze boosting systems falls short of expectations, market competition intensifies, and the share of major customers declines.