Guosen: The domestic and international prosperity of the electrical equipment industry continues to increase, boosting the shipment of lithium batteries in all sectors due to the growth in end demand.

Guosen released a research report stating that the performance of power grid companies in the first half of 2024 generally showed a steady growth trend, and as deliveries enter the peak season in the second half of the year, performance elasticity is expected to further improve. With multiple demands such as the development of new energy, growth in electricity consumption, and renovation of old power grids, the investment cycle of power grids is long, and there is great potential for Chinese companies to increase their overseas penetration rate. The shipment volume of the lithium battery industry increased in Q2, and looking ahead to the third quarter, terminal demand will enter the peak season, and shipment volume at all stages is expected to steadily increase. In addition, the performance of photovoltaic companies in the first half of the year was generally under pressure. Looking ahead to the second half of the year, it is expected that the growth rate of photovoltaic installations will slow down, and the profitability of segments such as glass, film, and silver paste will be under pressure, while the shipment volume of inverter companies is expected to further increase. The main points of Guosen are as follows: Continued prosperity in the power equipment industry at home and abroad In the first half of 2024, the performance of power grid companies generally showed a steady growth trend, and in the second half of the year, with deliveries entering the peak season, performance elasticity is expected to further improve. Against the backdrop of the development of new types of power systems in China, the urgency of upgrading and renovating distribution networks and rural networks is increasing. Internationally, with multiple demands such as the development of new energy, growth in electricity consumption, and renovation of old power grids, the investment cycle of power grids is long, and there is great potential for Chinese companies to increase their overseas penetration rate. Key companies to watch include Henan Pinggao Electric (600312.SH), Eaglerise Electric & Electronic (002922.SZ), Huaming Power Equipment (002270.SZ), NARI Technology (600406.SH), Sieyuan Electric (002028.SZ), and Hexing Electrical (603556.SH) that have overseas layouts. Wind power demand is expected to improve in the second half of the year Affected by industry demand and price competition factors, wind power companies generally faced pressure on their performance in the first half of 2024, with companies with a high proportion of exports showing relatively strong resilience in their performance. In the second half of the year, with the sequential improvement in domestic onshore and offshore wind demand and the decline in prices of bulk materials, the performance of companies is expected to significantly improve sequentially. In 2025-2026, overseas offshore wind power is expected to enter a period of expansion, and domestic leading companies in submarine cables and piling are expected to benefit fully. Domestic onshore wind turbine quotations are stabilizing, building a profit bottom, and with the background of energy transition in emerging markets, the demand for wind power is gradually increasing, and domestic leading companies are opening up overseas markets with comprehensive advantages. Key companies to watch include wind turbine companies and leading component companies such as Goldwind Science & Technology (002202.SZ), Sany Renewable Energy (688349.SH), Riyue Heavy Industry (603218.SH), Ficont Industry (Beijing) (605305.SH). Increased shipment volume in the lithium battery industry in Q2 Demand for electric vehicles, energy storage, and consumer electronics is steadily recovering, with the shipment volume growing by 10%-60% in Q2 2024 for top battery companies, with most of the companies seeing a significant increase in the shipment volume of energy storage batteries. With the recovery in capacity utilization, some companies saw a slight sequential improvement in net profit per unit; companies primarily shipping energy storage batteries faced profit pressure in intense competition. In the second quarter, the shipment volume of negative electrodes, separators, and lithium iron phosphate positive electrodes significantly increased, while the shipment volume of ternary positive electrodes remained relatively stable or slightly decreased for most companies in the background of weak overseas demand. With the boost in capacity utilization, the unit profitability of segments like lithium iron phosphate and electrolyte stabilized, while some negative electrode companies saw a decline in profitability from impairment effects. Looking ahead to the third quarter, terminal demand will enter the peak season, and the shipment volume at all stages is expected to steadily increase. Key companies to watch include Zhuhai CosMX Battery (688772.SH) and Contemporary Amperex Technology (300750.SZ). The mid-year performance of photovoltaic companies is generally under pressure In the first half of 2024, the price of polysilicon continued to decline and is currently below the cash cost of first-tier companies; silicon wafer and solar cell companies are facing operating losses due to intensified competition and insufficient industry demand, and integrated component companies are seeing differentiated profitability, with companies with higher domestic sales percentages reporting losses for mid-year results, while companies with higher revenues from overseas (especially the US market) are maintaining profitability for the time being. In terms of auxiliary materials, the profitability of silicon wafer auxiliary materials such as crucibles, quartz sand, and hot fields in the first half of the year is under pressure, with a significant year-on-year decline in sector performance and an extended accounts receivable turnover period; the revenue of photovoltaic silver paste companies is still growing but profitability is deteriorating; prices of auxiliary materials for components such as photovoltaic film and glass are generally declining, and although raw material prices have decreased, unit profitability is declining year-on-year; in terms of inverters, most inverter companies are seeing a sequential improvement in shipments. Looking ahead to the second half of the year, it is expected that the growth rate of photovoltaic installations will slow down, and the profitability of segments such as glass, film, and silver paste will be under pressure; the turning point of profitability for silicon materials, silicon wafers, solar cells, components, as well as hot fields, quartz sand, and crucibles is still to be observed, and the shipment volume of inverter companies is expected to further increase. Key companies to watch include Tongwei Co., Ltd. (600438.SH) and Sungrow Power Supply (300274.SZ). Risk warning: Risks of policy changes; large fluctuations in raw material prices; electric vehicle production and sales falling below expectations.