Guotai Haitong: Both domestic and foreign markets jointly drive industry demand, giving the "buy" rating to the electric power equipment industry.

Guotai Haitong released a research report stating that domestic and foreign demand resonate, driving rapid growth in the power equipment industry demand, and giving the industry a "buy" rating. State Grid's investment is growing rapidly, main grid construction is progressing intensively, and distribution grid is focusing on improving reliability and digitalization. At the same time, the overseas market for power equipment remains strong. In terms of the "15th Five-Year Plan" for the main grid, State Grid is consolidating the essential safety foundation of the power grid, ensuring the planning system safeguards the supply bottom line, and guaranteeing the achievement of energy transition goals. Guotai Haitong's main points are as follows: State Grid's investment is growing rapidly In the first quarter of 2026, State Grid completed fixed asset investment exceeding 129 billion yuan, a year-on-year increase of 37%. Among them, investment in new energy grid connection projects exceeded 10 billion yuan, a year-on-year increase of over 50%; completed distribution grid investment amounting to 56.8 billion yuan, accounting for 55% of various levels of grid investment, effectively improving the reliability and service quality of urban and rural power supply. In the first quarter of 2026, State Grid commenced construction of 393 projects and put 579 projects into operation for 110 (66) kV and above, with year-on-year growth rates of 42% and 24%, respectively. Projects like the construction completion and operation of the 500 kV fourth channel of the Chengde External Transmission Project are optimizing the structure of the power grid. Intensive progress in main grid construction, focusing on improving reliability and digitalization of distribution grid In terms of the main grid's "15th Five-Year Plan," State Grid is solidifying the essential safety foundation of the power grid, ensuring the planning system safeguards the supply bottom line, and guaranteeing the achievement of energy transformation goals. (1) Continuous advancement of ultra-high voltage construction Since 2026, projects like the Pianxi Ultra-high Voltage AC and Wan-E DC have started smoothly, with projects like the Gansu-Zhejiang and Datong-Huailai-Tianjin South Ultra-high Voltage projects accelerating. In April 2026, the Zhejiang section of the Gansu-Zhejiang 800 kV ultra-high voltage DC transmission project fully operational. Accelerating grid construction help meet the growing demand for electricity, solidifying energy support for industrial transformation, and upgrading new quality production. (2) Ultra-high Voltage and High Voltage are also investment priorities In addition to ultra-high voltage, inter-provincial assistance in the main grid for ultra-high voltage and high-voltage projects is also a key investment focus. In April 2026, the Xiangyu Back-to-Back Interconnection and Hunan-Guizhou Power Flexible Assistance, both major projects, entered the construction stage, marking a crucial step in the construction of the energy artery for interconnection in the three provinces of Hunan, Guangdong, and Guizhou. (3) Distribution grid focuses on improving reliability and digitalization Regarding the "15th Five-Year Plan" for the distribution grid, State Grid plans to increase its capacity level, improve its reliability level, enhance its power quality level, and improve its digitalization and intelligence level. For the urban grid, State Grid plans to proactively plan urban distribution grids, optimize the layout of grid facilities, and continuously improve power supply reliability and distribution grid intelligence. For the rural grid, State Grid vigorously implements rural grid consolidation and improvement projects and charging infrastructure access to support grid development. Continued high prosperity in the overseas market for power equipment From January to April 2026, China's major power equipment products maintained fast export growth. Transformer exports amounted to 132.1 billion yuan, an increase of 18%; switch exports amounted to 127.2 billion yuan, an increase of 17%. Domestic and overseas push demand for power equipment industry Domestic market: Ultra-high voltage construction continues to advance, and main grid ultra-high voltage and high-voltage inter-provincial assistance are also investment priorities. Meanwhile, efforts are being made to improve the reliability and digitalization of the distribution grid. Overseas market: China's exports of major power equipment products remain highly prosperous. Domestic and foreign demand resonate, driving rapid growth in the power equipment industry demand, and giving the industry a "buy" rating. Risk warning: Domestic grid investment is lower than expected, and overseas demand is lower than expected.