The company's recent situation

AI computing power has been deployed on a large scale, and electricity consumption in North American data rooms has surged, and there is a shortage of electricity. Considering the long cycle of nuclear power construction and the slow connection of new energy sources to the grid, gas turbine power generation has become an excellent short-term power generation method. According to the company's announcement, Jerry Co., Ltd. has a product series of 35MV mobile gas turbine generator sets and 6MV mobile gas turbine generator sets, and has now signed a gas turbine strategic cooperation agreement with Siemens Energy. We expect Jerry will be the first to benefit from the boom in gas turbines in North America.

reviews

The AI computing power layout has brought about a shortage of electricity in North America, and gas turbines have become the best short-term solution. The AI computing power layout has increased dramatically. According to estimates from the LessWrong website, Microsoft, Google, Meta, Amazon, and XAI will exceed the equivalent H100 of 12.4 million GPUs in terms of GPU/TPU holdings in 2025. According to Precedence Research's estimates, the US AI market size is 146.09 billion US dollars in 2024, and is expected to reach 851.46 billion US dollars by 2034, with a compound annual growth rate of 19.3% from 2024 to 2034. AI also requires high electricity stability. Electro Industries notes that approximately 40% of data center outages are related to power quality, and 80% of the issues are internal to the facility. Compared to nuclear power with a long construction cycle and wind power photovoltaics that are connected slowly to the grid, gas turbines have the characteristics of short deployment cycles and high stability, and we expect them to be the most suitable power generation method for data centers in the short term.

The gas turbine pattern is highly concentrated, and the shortage of supply has led to a rapid rise in prices. In 2023, according to Guanyanxia statistics, the “three giants” of Mitsubishi, Siemens Energy, and GE gas turbines accounted for 36%, 24%, and 16% of the market share respectively, for a total of 76%. Due to high technical barriers to gas turbines and a long expansion cycle, gas turbines are currently in short supply. According to a survey by the US Bureau of Labor Statistics, the price index of gas turbines continued to rise by 30.12% between 2017 and 2024, with a year-on-year increase of 4.47% in 2024.

We expect a cumulative total of 94.3GW of gas turbines installed in North America over 24-30 years, and Jerry Co., Ltd. is expected to be the first to benefit as a complete engine supplier. According to our estimates, the annual installed capacity of gas turbines in North America was 8.4/12.9/13.5/14.1/14.6/15.1/15.6 GW in 24-30. We assume that Jerry's share of gas turbines in North America will increase from 1% in 25 to 6% in 30 years, and the corresponding revenue will be 0.11/0.78 billion US dollars. At the same time, considering the company's continued release of electric fracturing equipment in North America, Jerry Co., Ltd. has further opened up room for growth in North America.

Profit forecasting and valuation

Considering that gas turbine emissions are uncertain, we have temporarily kept the company's 2024 profit forecast and 2025 profit forecast unchanged, and introduced a 2026 net profit forecast of 3.581 billion yuan; the current stock price corresponds to a price-earnings ratio of 12.4 times/10.7 times for 2025/2026. Maintaining an outperforming industry rating and a target price of 45.00 yuan, switching the valuation to 25 years, corresponding to 14.9 times the price-earnings ratio of 2025 and 12.9 times the price-earnings ratio of 2026, with 20.3% upside compared to the current stock price.

risks

The expansion of business in the North American market fell short of expectations; the capital expenditure of domestic oil and gas companies fell short of expectations.