Guolian: The newly established industries in the first half of 2024 are under pressure. Leading companies in various sectors demonstrate strong alpha attributes.

Guolian released a research report stating that the electric power industry in the first half of 2024 is under pressure, with leading companies in various sectors showing strong alpha attributes. With the dual effect of slowing demand for photovoltaic installations and the release of a large amount of new technology production capacity, competition in the photovoltaic industry is intensifying, causing a significant impact on sector profitability. Operationally stable companies are expected to navigate through the industry downturn. For the wind power sector, the accumulation of offshore wind power will continue to boost industry prospects. In the energy storage sector, declining prices are putting pressure on performance, but the potential of overseas emerging markets is gradually becoming apparent, recommending a focus on top companies with a wide distribution channel. In the lithium battery sector, companies that focus on battery technology innovation and have strong alpha attributes are worth watching. In the first half of 2024, the overall net profit attributable to shareholders of listed companies in the electric power industry decreased by 56.10% year-on-year, ranking 27th out of 30 industries. Analysis of net profit of sub-industries shows year-on-year declines in nuclear power (yoy-4.3%), power grid equipment (yoy-18.0%), energy storage (yoy-18.7%), wind power (yoy-21.2%), lithium battery (yoy-28.7%), and photovoltaics (yoy-104.1%). Photovoltaics: Intensifying competition affects sector profitability, operationally stable companies expected to navigate through the industry downturn In the first half of 2024, companies in the photovoltaic sector achieved operating income of 599.55 billion yuan, a decrease of 15.7% year-on-year; achieving a net profit attributable to shareholders of 3.73 billion yuan, a decrease of 95.3% year-on-year; and a gross profit margin of 13.6%, a decrease of 7.9 percentage points year-on-year. With the dual effect of slowing demand for photovoltaic installations and the release of a large amount of new technology production capacity, industry competition is intensifying, causing a significant impact on sector profitability. Operationally stable companies are expected to navigate through the industry downturn. Wind power: Offshore wind power accumulates, industry prospects expected to continue to improve In the first half of 2024, companies in the wind power sector achieved operating income of 149.44 billion yuan, a year-on-year increase of 0.5%; achieving a net profit attributable to shareholders of 8.85 billion yuan, a year-on-year decrease of 21.2%; in the second quarter of 2024, companies in the sector achieved operating income of 87.60 billion yuan, a year-on-year decrease of 2.2%; achieving a net profit attributable to shareholders of 5.40 billion yuan, a year-on-year decrease of 16.1%. With the industry entering an accelerated construction phase, future offshore wind power accumulation is likely to lead to a turnaround in industry prospects. Energy storage: Price declines put pressure on performance, emerging markets open up incremental space In the first half of 2024, companies in the energy storage sector achieved operating income of 78.34 billion yuan, a decrease of 2.0% year-on-year; achieving a net profit attributable to shareholders of 8.40 billion yuan, a decrease of 18.7% year-on-year; in the second quarter of 2024, companies achieved operating income of 45.78 billion yuan, an increase of 7.0% year-on-year; and achieved a net profit attributable to shareholders of 5.11 billion yuan, a decrease of 13.2% year-on-year. The potential of overseas emerging markets is gradually becoming apparent, recommending a focus on top companies with a wide distribution channel. Lithium battery: Bright performance in the battery segment, focus on new technologies and overseas expansion In the first half of 2024, companies in the lithium battery sector achieved revenue of 962.233 billion yuan, a year-on-year decrease of 3.9%; net profit attributable to shareholders of 56.725 billion yuan, a year-on-year decrease of 28.7%; in the second quarter of 2024, companies in the sector achieved revenue of 530.077 billion yuan, a year-on-year increase of 1.1%; net profit attributable to shareholders of 34.687 billion yuan, a year-on-year decrease of 18.4%. With the industry undergoing consolidation or nearing its end, focusing on new technology innovation and leading companies with strong alpha attributes is recommended. Power grid equipment: Steady progress in ultra-high voltage construction, distribution network may see new growth In the first half of 2024, companies in the power grid equipment sector achieved operating income of 321.01 billion yuan, a year-on-year increase of 6.2%; achieving a net profit attributable to shareholders of 18.85 billion yuan, a year-on-year decrease of 18.0%; in the second quarter of 2024, companies in the power grid equipment sector achieved operating income of 179.42 billion yuan, a year-on-year increase of 6.2%; achieving a net profit attributable to shareholders of 11.18 billion yuan, a year-on-year decrease of 14.8%. Overall, revenue in the first half of 2024 maintains steady growth, with expectations that under the direction of accelerated investment in ultra-high voltage construction and distribution networks, the industry chain will maintain a growth trend. Investment recommendation: Focus on leading companies with strong alpha attributes and innovative new technologies In the first half of 2024, the electric power industry is under pressure, with leading companies in various sectors showing strong alpha attributes. Recommendations for each sector are as follows: 1) Photovoltaics: Sungrow Power Supply (300274.SZ), LONGi Green Energy Technology (601012.SH), Flat Glass Group (601865.SH), Changzhou Fusion New Material (301295.SZ), Longhua Technology Group (300263.SZ), CSI Solar Co., Ltd. (688472.SH, CSIQ.US), etc. 2) Wind power: Ningbo Orient Wires & Cables (603606.SH), Jiangsu Zhongtian Technology (600522.SH), Dajin Heavy Industry (002487.SZ), Jiangsu Haili Wind Power Equipment Technology (301155.SZ), Shanghai Taisheng Wind Power Equipment (300129.SZ), etc. 3) Energy storage: Sineng Electric (300827.SZ), Ningbo Deye Technology (605117.SH), Kehua Data Co., Ltd. (002335.SZ), Shenzhen Sinexcel Electric (300693.SZ), etc. 4) Lithium battery: Contemporary Amperex Technology.300750.SZ) - Eve Energy Co., Ltd. 300014.SZ) - Hunan Zhongke Electric 300035.SZ) - Guangzhou Tinci Materials Technology 002709.SZ) - Shenzhen Capchem Technology 300037.SZ) - Shenzhen Kedali Industry 002850.SZ) - Sunwoda ElectronicElectric grid equipment: China XD Electric (601179.SH), Xj Electric Co., Ltd. (000400.SZ), NARI Technology (600406.SH), Hexing Electrical (603556.SH), Hainan Jinpan Smart Technology (688676.SH), Guangdong Mingyang Electric (301291.SZ), etc. Risk warning: Risks of significant fluctuations in raw material prices; risks of overseas policy changes affecting exports; risks of sustained low bid prices.