Caitong: Data center expansion drives increasing demand for gas turbine industry.

Caitong released a research report stating that with the AI giants entering a data center expansion cycle, the data center is experiencing a simultaneous increase in quantity and capacity. Under the assumption of McKinsey Center, the demand for data center capacity is expected to grow at a rate of 22% per year from 2023 to 2030, but electricity may become a bottleneck for data center expansion. The current overseas AIDC expansion demand is driving rapid expansion of the gas turbine market, and it is optimistic about the prosperous opportunities for domestic component manufacturers to support foreign leading companies, focusing on future order growth and market share expansion. Recommended stocks include Anhui Yingliu Electromechanical (603308.SH), Allied Machinery (605060.SH), and Himile Mechanical Science and Technology (002595.SZ). Caitong's main points are as follows: The "Pearl on the Crown" of the Manufacturing Industry Gas turbines are power machinery that propels turbine blades at high speed by mixing fuel with air. Gas turbines are regarded as the "pearl on the crown" of the equipment manufacturing industry, reflecting a country's industrial level. The main components include compressors, combustion chambers, and turbines. According to GrandView Research estimation, the global gas turbine market size will be $10.19 billion in 2023. Overseas giants monopolize the whole machine, while domestic companies actively participate in the component segment Overseas giants monopolize the whole machine market: In 2023, Mitsubishi Heavy Industries, Siemens Energy, and GE collectively hold about 76.3% of the global market share, with high industry barriers and few potential competitors. The domestication of gas turbines is still in progress: China's gas turbine industry started relatively late, and it has been in a state of being "constrained" for a long time. Currently, the technology to produce small gas turbines has been achieved domestically but large gas turbines still rely on imports. The participation of domestic companies in the component segment is continuously increasing: Since 2018, the number of gas turbine component purchase orders has entered a phase of rapid growth, with the number of procurement events increasing from 451 in 2018 to 3,852 in 2023, resulting in rapid development of the gas turbine industry supply chain. Taking advantage of the growth of data centers, the demand for gas turbines has another growth point With AI giants starting a data center expansion cycle, the data center is experiencing a simultaneous increase in quantity and capacity. According to McKinsey Center's assumptions, it is estimated that the demand for data center capacity will grow at a rate of 22% per year from 2023 to 2030, but electricity may become a bottleneck for data center expansion. The clustering of data centers has led to overloaded power grids, and gas turbines may become the best solution: Gas turbine projects in the US are quickly connected to the grid, gas turbines have the advantages of easy deployment, energy efficiency, environmental protection, and easy maintenance. At the same time, the cost of gas turbines in the US is relatively low, only slightly higher than nuclear power plants with a construction period of 5-6 years, making them the best choice for data centers. The early signs of rising industry demand Gas turbine leader GE Vernova's gas turbine orders totaled 20.2GW in 2024, an increase of 112.6% compared to 9.5GW in 2023. It is expected that by 2028, the installed capacity demand catalyzed by US data centers will account for 14% of the industry demand. Risk Warning The risk of AIDC construction falling short of expectations; the risk of price fluctuations in the supply chain; and the risk of domestic market share expansion falling short of expectations.