CSC Securities: Global power grid investment is expected to enter a boom cycle, and domestic power grid equipment manufacturers will also encounter opportunities to go global.

CAC Securities published a research report stating that in order to achieve energy security, cost reduction, and green transformation, global electricity grid investments are expected to enter a prosperity cycle. China State Grid proposed an investment of 4 trillion RMB during the "15th Five-Year Plan" period, an increase of 40% compared to the "14th Five-Year Plan". Europe proposed a comprehensive plan for electricity grids, expecting to leverage 1.2 trillion in grid investments. The three major electricity grid operators in the United States announced a total of $75 billion investment plan for grid transmission and transformation. Global AI investments are booming, and are expected to drive a market of billions of dollars in the next five years. The direction of global electricity grid transformation includes ultra-high voltage and main grid upgrades, distribution grid digitalization upgrades, as well as on-demand microgrids, virtual power plants, and off-grid electricity. The electricity grid equipment industry has benefited greatly from the boost in global electricity grid investment, and domestic grid equipment manufacturers are also seeing opportunities to expand overseas. CAC Securities' main points are as follows: Domestic ultra-high voltage and main grid transmission segments During the "14th Five-Year Plan" period, China's investment in ultra-high voltage construction exceeded 380 billion RMB, but the progress of construction was below expectations. At the same time, the rapid growth of wind and solar installations in China has surpassed thermal power by 2025 Q1. The scale and proportion of wind and solar power generation connected to the grid is rapidly increasing. Ultra-high voltage is crucial for inter-regional power transmission and addressing the imbalance between power generation and consumption regions, so investment in this area is expected to increase during the "15th Five-Year Plan" period. The increasing pressure of renewable energy integration is putting strain on grid stability, leading to a greater emphasis on main grid upgrades. In segments of the electricity grid with higher voltage levels, equipment values are concentrated on a few categories, with market shares concentrated among leading manufacturers. These leading manufacturers are expected to benefit fully from the increased investment in the transmission segment, focusing on companies like NARI Technology, Sieyuan Electric, TBEA Co., Ltd., and China XD Electric. Domestic distribution grid digitalization upgrades and microgrids, virtual power plants The distribution grid acts as the "capillaries" connecting the main grid and end-users. With the large-scale deployment of distributed energy resources, the electrification trend of end-users such as electric vehicles is increasing the demand for digitalization upgrades in the distribution grid. Policies like green electricity procurement and market-based trading are paving the way for business models that match distributed energy supply with end-user demand through the construction of microgrids and virtual power plants. "Smart electricity calculation" has become a national-level new infrastructure strategy, bringing new opportunities for coordinated electricity and carbon calculation, as well as new challenges for grid intelligent dispatching and power trading. The scale of distribution grid upgrades is relatively large, accounting for more than 60% of China State Grid's investment scale during the "14th Five-Year Plan" period, but it involves a wider variety of regional grids, equipment, and materials, resulting in a more fragmented market landscape. China State Grid is adopting a regional joint procurement model to enhance the efficiency of equipment bidding and procurement, and leading enterprises are expected to maintain a relatively stable market position. Focus on companies like Dongfang Electronics, CSG Digital Power Grid Research Institute, and China Southern Power Grid Energy Efficiency & Clean Energy. AIDC-related power supply systems Global cloud companies' AI investment spending remains strong, directly driving the demand for power supply systems in AI infrastructure. According to IEA forecasts, global AIDC installations are expected to increase by 129GW by 2025-2030, with a cumulative increase of 133%, and electricity consumption is expected to increase by 530TWh, a cumulative increase of 127.4%. Power supply systems account for about 10% of total AIDC investment, and based on IEA forecasts, the average annual market size for the next five years is expected to exceed one trillion RMB. As chip power levels increase, there is a trend towards iteration and optimization of power supply solutions, with a likely increase in the proportion of high-voltage direct current power supply solutions, driving demand for Panama power sources and SST power sources. Focus on companies like Beijing Sifang Automation, Hainan Jinpan Smart Technology, and Hangzhou Zhonhen Electric. Opportunities for domestic grid equipment manufacturers to expand overseas The increase in global grid investments will directly boost the demand for grid equipment. China's grid equipment industry chain covers all voltage levels, connects upstream and downstream industries, and runs ahead or alongside in technology, and compared to similar foreign equipment, it has cost-effectiveness advantages. Leading manufacturers are actively deploying overseas strategies and joining certification systems in areas like the United States and Europe. In recent years, exports of equipment such as power transformers, power cables, and electricity meters have reached record highs. Focus on companies like Eaglerise Electric & Electronic, Beijing SOJO Electric, and Huaming Power Equipment. Risk warning: Global grid investment falls short of expectations, substantial increases in raw material prices or supply shortages, intensification of geopolitical conflicts affecting supply chains and global capacity, AI capital expenditure falling short of expectations or declining, significant exchange rate fluctuations.