Guotai Junan: AIDC and data center construction booming, high-power diesel engine usher in development opportunities.

Guotai Junan Securities released a research report stating that the continuous high prosperity of domestic AIDC and data center construction has led to a high demand for high-end diesel generators. The distribution system of data centers requires strict requirements, and high-level data centers need to be equipped with backup power sources, with diesel generators being the most mainstream backup power configuration, with high performance requirements. Currently, high-power diesel generators for data centers are still dominated by overseas companies, with the engine being the core component. Overseas manufacturers have seen continued high growth in business orders, but the expansion progress is slow, and the expansion process is generally constrained by the complex supply chain unique to the engine industry. The current high demand for high-power diesel generators is causing a supply shortage, and the supply chain is expected to start a trend of price increases, with global supply chain fluctuations giving rise to development opportunities for domestic brands. Guotai Junan Securities' main points are as follows: The construction of AIDC is accelerating and the demand for diesel generators is increasing. The distribution system of data centers requires strict requirements, and high-level data centers need to be equipped with backup power sources. Backup power is a necessary condition for ensuring the normal operation of Grade-A data centers, with diesel generators being the most mainstream backup power configuration, with high performance requirements. Benefitting from the continuous high prosperity of domestic AIDC and data center construction, there is a high demand for high-end diesel generators. We estimate that the market for diesel generators used in domestic data centers will reach 9.1 billion yuan by 2025, with a year-on-year growth of over 50%, and it is expected that the market space will reach 18.1 billion yuan by 2028, with a 3-year CAGR of 26%. High-power diesel generators are in short supply, and domestic brands are facing strategic development opportunities. High-power diesel generators for data centers are still dominated by overseas companies, with the engine being the core component of diesel generators. The power of high-power diesel generator sets used in AIDCs is generally 1.8-2MW, mainly using products from large foreign import enterprises. Currently, the main manufacturers of diesel generators used in global AIDCs are Cummins, MTU, Caterpillar, Mitsubishi, etc., while the major OEM manufacturers of diesel generator sets in China are Shanghai Cooltech Power, Weichai Heavy Machinery, Haotai Technology, and Sumec Corporation, with diesel engine manufacturers being Weichai Power, Yuchai International, etc. Benefitting from the explosive demand for data centers, overseas manufacturers such as Cummins have seen a continuous high growth in revenue and profit margins in the power system business. However, the expansion progress of overseas manufacturers is slow, and the expansion process is generally constrained by the complex supply chain unique to the engine industry. The current shortage of high-power diesel generators is expected to lead to a trend of price increases in the supply chain. Global supply chain fluctuations are expected to give rise to development opportunities for domestic brands. In terms of engines, domestically produced diesel engine technology is accelerating to catch up with international levels; in terms of generator sets, major OEM companies are strengthening their cooperation with overseas engine manufacturers to ensure supply, and are expected to benefit from profit improvements due to supply and demand tensions. Investment recommendation: Maintain an "hold" rating for the industry. Benefitting from the continuous high prosperity of domestic AIDC and data center construction, there is a high demand for high-end diesel generators. The distribution system of data centers requires strict requirements, and high-level data centers need to be equipped with backup power sources, with diesel generators being the most mainstream backup power configuration, with high performance requirements. Currently, high-power diesel generators for data centers are still dominated by overseas companies, with the engine being the core component. Overseas manufacturers have seen continued high growth in business orders, but the expansion progress is slow, and the expansion process is generally constrained by the complex supply chain unique to the engine industry. The current shortage of high-power diesel generators is expected to lead to a trend of price increases in the supply chain, with global supply chain fluctuations giving rise to development opportunities for domestic brands. In terms of engines, domestically produced diesel engine technology is accelerating to catch up with international levels; in terms of generator sets, major OEM companies are strengthening their cooperation with overseas engine manufacturers to ensure supply, and are expected to benefit from profit improvements due to supply and demand tensions. Catalyst: Acceleration of data center construction; price increase of diesel engine products Risk warning: Insufficient supply of computing chips; international trade frictions; deterioration of competitive landscape