According to the information obtained from the Zhitong Finance APP, China International Capital Corporation (中金公司) issued a research report pointing out that global grid investments have resilience, and going global is still an important driving force for high-quality enterprises to achieve growth. China International Capital Corporation (中金公司) believes that in the context of energy transformation, transnational interconnection, and old infrastructure renovation, Europe is one of the regions with strong demand for electrical utilities in recent years. As the largest importer of transformers in the European Union, China has certain performance and brand foundation, and is expected to further open up the European market with its technological strength and cost advantages.

CICC's main points are as follows:

Macro: Power generation and electricity consumption are expected to grow in tandem, and operator plans continue to accelerate grid investments.

The new UK government has set more aggressive clean energy installation goals and strongly supports the popularization of new energy vehicles and electrolytic cell hydrogen production. BNEF predicts that by 2030, UK electricity demand is expected to increase by 25% compared to 2023; in the French parliamentary elections, the left party gained a dominant position, which BNEF believes indicates that France will continue to actively promote energy transition in the next five years; Although there is uncertainty in the energy policies of the US election, the stable stock transformation, coupled with clear growth in power generation capacity and the promotion of re-industrialization and AI, will drive the recovery of electricity consumption in the USA. We believe that investment in grid infrastructure still needs to be accelerated. In addition, looking at the Capex plans of multiple European and American grid operators such as NGG, Elia, ENEL, Exelon, and Duke, the continuous enhancement of grid planning enhances the certainty of investment implementation.

Medium-term: China's export of electrical utilities remains stable and is bullish on the demand opportunities in the European market.

From January to July 2024, China's major export of electrical utilities increased by 17.2% year-on-year, maintaining a steady growth, with the growth rate of exports to the European market being particularly eye-catching at 23.9% year-on-year. We believe that in the context of energy transformation, transnational interconnection, and old infrastructure renovation, Europe is one of the regions with strong demand for electrical utilities in recent years. As the largest importer of transformers in the European Union, China has certain performance and brand foundation, and is expected to further open up the European market with its technological strength and cost advantages.

Micro: The performance in the second quarter of 2024 verifies the continuation of prosperity, and is bullish on the growth potential of Chinese companies under the overflow of orders.

The demand prosperity in the pre-process stage is relatively high, and the revenue growth rate and BB Ratio indicators in the second quarter of 2024 continue to perform well. Hitachi Ltd Sponsored ADR (日立) and GEV's upward adjustment of the annual performance guidance for electrical equipment demonstrates their confidence in development. At the same time, the leading manufacturers maintain a high level of order delivery time, and the overflow effect of orders is further highlighted. Second-line brands such as Modern Electric are accelerating their growth. We also see the potential for outstanding Chinese manufacturers to win subsequent orders. There is a clear differentiation in the post-process stage performance, mainly due to different downstream structures. The demand growth rate for datacenters and utilities is leading, while the traditional construction market remains weak. In terms of electrical meters, the competitive position of European and American manufacturers in emerging markets continues to decline, while Chinese companies are expanding their influence. In the cable sector, there is a high demand for European power grid interconnection and offshore wind power support.

Risk

Overseas power grid investment falling short of expectations, risks from changes in international trade policies, and exchange rate volatility.