New Stock Preview | With rare licenses and 2 billion orders in hand, can Hua Cheng Electric Power knock on the door of the Hong Kong stock market?

Recently, according to the Hong Kong Stock Exchange, Guangdong Huacheng Electric Power Energy Co., Ltd. (referred to as Huacheng Electric Power) has submitted an application for listing on the main board of the Hong Kong Stock Exchange, with Li Gao Enterprise Financing Limited as its exclusive sponsor. This company is not a newcomer to the capital market - as early as August 2016, Huacheng Electric Power had already listed on the New Third Board, and then voluntarily delisted on April 1, 2026. As one of the only two privately-owned enterprises in Guangdong Province that simultaneously hold Class A qualifications for power project design and consulting, Huacheng Electric Power has built a competitive moat with its scarce qualifications; and the company's forward-looking layout in the field of new energy and AI makes this long-term value worth paying attention to. Will the market be willing to pay for this "small and beautiful" energy solution provider in this Hong Kong IPO? Behind the high growth, cash flow and collection pressures are evident Public information shows that Huacheng Electric Power was established in 2003, headquartered in Zhuhai, Guangdong, and has transformed from a power design agency to a comprehensive energy solution provider focusing on new types of power. According to a report by Frost & Sullivan, the company is one of the only two privately-owned enterprises in Guangdong Province that hold Class A qualifications for power project design and consulting at the same time. The company's customer network covers the whole country, providing long-term services to the Southern Power Grid and its subsidiaries, as well as many listed and private power generation and transmission companies, participating in national landmark projects such as the Hong Kong-Zhuhai-Macao Bridge and Shenzhen-Zhongshan Passage, with the longest cooperation period with the top five customers in the 2023-2025 fiscal years reaching 18 years. In terms of business layout, Huacheng Electric Power has covered the entire chain of "sources, networks, loads, and storage", including preliminary survey design and consulting, mid-term EPC general contracting, and later operation and maintenance and new energy project investment. The company proactively entered the field of new energy power design consulting in 2010, and expanded to EPC services in 2020, focusing on domestic projects of CECEP Solar Energy and wind power. Financial data shows that in the 2023-2025 fiscal years, the company's operating income was 341 million, 322 million, and 407 million yuan respectively, with a significant year-on-year growth of 26.4% in 2025. Meanwhile, net profits for each year were 17.536 million, 34.037 million, and 36.919 million yuan, with the overall gross profit margin steadily increasing from 18.2% in the 2023 fiscal year to 26.5% in the 2025 fiscal year, and the profitability continuously strengthening. In terms of income structure, EPC services are the company's core income engine, accounting for 86.4%, 81.3%, and 84.5% of revenue in the 2023-2025 fiscal years respectively. Survey, design, and consulting services account for a small portion of income, with a revenue share of about 13.3% in 2025, but with a gross profit margin consistently exceeding 64%, it is a typical high-margin business with high quality. Behind the impressive growth, financial risks cannot be ignored. The company's cash and cash equivalents at the end of each fiscal year from 2023 to 2025 were 40.498 million, 21.394 million, and 14.585 million yuan, showing a continuous decline trend, with a significant decrease in 2025. At the same time, the turnover days of trade receivables and bills and contract assets (excluding retention) have sharply increased, from 118 days in the 2023 fiscal year to 254 days in the 2024 fiscal year, and further to 383 days in the 2025 fiscal year. The company explained that this was mainly due to the relatively high amount of un-invoiced revenue and the longer time required by state-owned enterprise customers to complete the acceptance process. If this trend continues, it may put pressure on the company's future liquidity. On the positive side, the company has a very ample order backlog, which will provide a stable income guarantee in the future, and the cash flow situation is expected to improve. As of December 31, 2025, the contracted value of unfinished projects for Huacheng Electric Power amounts to approximately 2.005 billion yuan, more than double the 960 million yuan at the end of 2023; the number of contracts in hand has also increased from 360 to 442. Macro trends are emerging, and grid investments are entering a boom cycle From a more macro perspective of the industry, global grid investments have entered a new cycle of prosperity in order to achieve energy security, cost reduction, and green transformation. Energy transition, grid digitalization transformation, and AI investment are becoming the core DRIVING factors in driving grid investments. It is understood that domestic grid investments have accelerated significantly since 2024. In 2024, the total grid investment of State Grid and Southern Grid reached 713.7 billion yuan, an increase of 12.4% year-on-year. In 2025, the investment by State Grid is expected to reach a new high of 650 billion yuan. Looking ahead, during the "14th Five-Year Plan" period, the fixed asset investment of State Grid is expected to reach 4 trillion yuan, a 40% increase from the "13th Five-Year Plan"; Southern Grid has also announced a record high fixed asset investment plan of 180 billion yuan in 2026, marking five consecutive years of growth. At the same time, the installed capacity of new energy will continue to grow. As of the end of March 2026, the total renewable energy installed capacity in the country has reached 2.395 billion kilowatts, accounting for about 60.4% of the total installed capacity in China. The "China Renewable Energy Development Report Annual 2025" predicts that in 2026, China's wind and solar new installed capacity will be about 300 million kilowatts. The growth in installed capacity will drive demand for related survey, design, and EPC services, bringing more income growth opportunities for service providers like Huacheng Electric Power. However, in terms of competitive landscape, Huacheng Electric Power has not yet established a dominant position in the market. According to the prospectus, in 2024, the energy solutions market in China showed a relatively concentrated competitive landscape, with the top five market participants accounting for 65.3% of the market share. Among them, CHINA POWER Construction Group leads by a wide margin with a 34.1% share. In comparison, Huacheng Electric Power only has a market share of about 0.04% and revenue of 300 million yuan. Despite the company's scarce qualifications, there is still a considerable gap in size and market influence compared to industry giants. In addition, the issue of renewable energy consumption in the new energy power industry is becoming increasingly prominent. As the scale of new energy grid-connected power generation continues to expand, the consumption capacity of the power grid has become a bottleneck. Since the beginning of 2025, the wind and solar curtailment rate has remained above 5%, at a higher level since 2021. In January and February 2026, the wind power utilization rate was 91.5% and the solar power utilization rate was 90.8%. Reports of cancellations or delays in investment in solar projects in several regions since the beginning of this year may result in the company's future performance falling short of expectations. Can "AI + Power" become the second growth curve? As new energy enters the market on a large scale and the market-oriented reform of the power industry enters a deep water area, "AI + Power" is becoming a new competitive track in the industry. On May 8, 2026, the National Development and Reform Commission and four other departments jointly issued the "Action Plan for Promoting the Two-Way Empowerment of Artificial Intelligence and Energy", marking the first inclusion of "power computation" in a national strategic document and proposing the two-way logic of "energy supporting AI development and AI empowering energy transformation". Huacheng Electric Power is one of the domestic enterprises that have earlier applied artificial intelligence systemically to the field of power design and operation. According to the prospectus, its self-developed Zeno AI design platform has been deeply integrated into daily operations. Tasks that used to be time-consuming and laborious such as cable routing planning, automatic selection of wind turbine sites, automatic layout of photovoltaic areas, and drafting feasibility study reports have all been intelligently processed by AI, greatly reducing time and improving delivery efficiency. It is understood that in terms of core technological patents, the company has applied for core patents such as "AI-based photovoltaic energy storage direct-flexible system and its scheduling detection method", aiming to reduce manual inspection costs and improve generation efficiency through AI fault warning, intelligent scheduling, and data analysis. At the same time, its applied patent "AI visual recognition-based method and system for automatically identifying non-deployable areas in wind farms" has transformed the highly manual process of pre-site selection into a batch output of high-precision layers, directly reducing the cost of feasibility studies and micro-site selection iterations. As of December 31, 2025, Huacheng Electric Power has accumulated 65 registered patents and 13 registered copyrights, including more than ten invention patents in the direction of AI and engineering intelligence, with 7 core invention patents already authorized. According to the prospectus, the proceeds from this IPO will further deepen the AI layout: planning to use the funds for the development of AI operation and maintenance services for new energy power projects, using AI to optimize business processes, and further promote EPC business. In summary Overall, in this move to the Hong Kong Stock Exchange, Huacheng Electric Power has many highlights in its fundamentals: scarce industry qualifications, high-quality and deep long-term customer relationships, and mid-term income visibility brought by an order backlog of over 20 billion yuan. However, the substantial increase in trade receivables turnover days and the continuous decrease in cash on hand have put substantial pressure on the company's financial health. With the continuous growth of grid investment and the ongoing advancement of AI empowerment, Huacheng Electric Power has taken a leading advantage with its forward-looking layout. As a mid-sized energy service provider, whether Huacheng Electric Power can build a differentiated moat in the segmented track will be the key to determining its long-term value.