China Securities Co., Ltd.: The power shortage in North America is still ongoing, and in the second half of the year, there is visibility for long-term order introduction for domestic power shortage chain.

China Securities Co., Ltd. released a research report stating that there is still a gap between power supply and demand. Theoretical calculations show that there will be annual power shortages of 14, 20, and 20 GW that need to be filled in the years 2026 to 2028. In terms of facts, the increase in overseas gas turbine prices (including EPC) in Q1 is direct evidence of supply and demand tightness. In terms of production scheduling, the company believes that in the second half of 2026, overseas gas turbine orders are expected to be scheduled after 2030, by which time the visibility of domestic power supply chain orders will increase, potentially leading to a sector-level market valuation switch. The main points of China Securities Co., Ltd. are as follows: North America still faces a power shortage, and the essence of the sector's downturn is concerns about long-term supply and demand visibility. From the end of April to June this year, individual stocks in the North American power shortage sector experienced a correction of around 15-40%. Essentially, prior to this decline, the market had already fully anticipated the prosperity of 2028 for the gas turbine sector, but the valuation switch to 2030 faced obstacles due to weak visibility of long-term AI capital expenditures and concerns about the power supply structure in the North American market following the release of SOFC and internal combustion engine production capacity. The notion that "gas turbine orders have peaked" is just an accelerator for the correction process. Supply and demand balance judgment: The company believes that there will still be a power shortage before 2028 and that the situation of gas turbine shortages in 2030 may be seen in the second half of 2026. The industry's supply and demand structure is the cornerstone of the entire investment logic, and there is a significant divergence in the market's understanding of this issue. The company analyzes this from the theoretical calculation and production scheduling facts as follows: 1. Theoretical calculation: Based on supply and demand analysis, the company estimates that there will be power shortages of 14, 20, and 20 GW in 2026, 2027, and 2028 respectively. 2. Facts analysis: 1) In the second half of 2026, it is expected that GEV will schedule around 10 GW of orders until after 2030, driving the long-term visibility of domestic gas turbine chain orders. 2) Limited supply of gas turbines, the accelerated release of internal combustion engines, SOFCs, and other capacities from 2027 to 2030 are evidence that power is still in short supply. 3) In the first quarter of this year, overseas gas turbine (including EPC) prices increased by 10-20% compared to the previous quarter. Prices are the most direct reflection of supply and demand, and there is currently no indication of prices falling due to decreased demand. In the second half of 2026, it is expected that overseas gas turbines will be scheduled beyond 2030, providing long-term visibility for domestic power supply chain orders. Risk factors: 1) Demand aspects: Changes in national infrastructure policies leading to lower-than-expected electricity investment; lower-than-expected grid investment; decreased demand for electrical equipment due to a slowdown in the growth of new energy installations; slowdown in the growth of national electricity consumption, etc.; slower-than-expected progress in the two-network tendering process; slower-than-expected progress in the construction of ultra-high voltage projects. 2) Supply aspects: Rising prices of major commodities such as copper and steel; tight supply of power electronics devices with slower progress in localization. 3) Policy aspects: Support for the new electricity market is less than expected; slower progress in electricity pricing mechanisms; slower-than-expected progress in the spot electricity market; lower-than-expected price difference between peak and off-peak electricity. 4) International situation: Quick resolution of energy crises and rapid decline in energy prices; deepening of international trade barriers. 5) Market aspects: Significant changes in competitive landscape; increased competition leading to lower-than-expected profitability at various stages of the electricity equipment industry; rise in transportation costs, etc. 6) Technological aspects: Slow progress in cost reduction through technology; difficulty in further improving technological reliability.