Overseas power grid investment boom has increased, and overseas sales of power transformers have increased

At present, the overseas power grid investment boom is on the rise, and the overseas power equipment market has considerable space, which brings opportunities for domestic companies with "strong technology, strong manufacturing, and low cost" to go overseas.

At present, the overseas power grid investment boom is on the rise, and the overseas power equipment market has considerable space, which brings opportunities for domestic companies with "strong technology, strong manufacturing, and low cost" to go overseas. Overseas orders from leading companies have accelerated significantly. We are optimistic about the overseas expansion of domestic power equipment and expect that the two major demands for overseas power grid renewal and new energy installed capacity growth will continue to be fulfilled. At present, investment in overseas power grids is accelerating, and demand for power equipment is abundant. One is due to the renovation of old lines. Taking the United States as an example, most of the existing transmission lines were built in the 1960s and 1970s and have entered the power grid transformation cycle; second, new energy consumption has encountered bottlenecks. In the past 10 years, the growth of power grid investment has significantly lagged behind power supply investment, resulting in the integration of new energy into the grid. The third is manufacturing investment. The United States continues to promote the reshoring and re-industrialization of the manufacturing industry, driving demand for power grid capacity, distribution equipment, etc. Fourth, the power grid infrastructure of emerging economies is relatively weak, and the problem of no power and weak power needs to be solved.

At the same time, China's power equipment companies have great potential to go overseas. At present, overseas competition is still dominated by European and American companies, and China's overseas market share of power equipment is expected to be less than 5%. In the short term, the periodic mismatch of overseas supply and demand provides opportunities for Chinese manufacturers; in the long term, domestic companies have the competitive advantage of "strong technology, strong manufacturing, and low cost." Although the barriers to going overseas are currently high, leading companies have experienced high growth in overseas orders and performance after long-term accumulation. The export value of transformers and meters has achieved high growth, and has long-term growth momentum.

Taking transformers as an example, demand for transformers in Europe and the United States will be booming in 2023. Against the background of tight overseas local production capacity, China's proportion of imported transformers in Europe and the United States is increasing. Taking the United States as an example, the United States will import power-related transformers worth US$5 billion in 2023, a year-on-year increase of 58%, of which imports from China will be US$130 million, a year-on-year increase of 89%, and a share of 2.6%; in January 2024, the United States will import The value of power-related transformers was US$430 million, a year-on-year increase of 44%, of which imports from China were US$24 million, a year-on-year increase of 343%, and the share exceeded 5% for the first time.

We continue to be optimistic about the overseas expansion of domestic power equipment, especially transformer-related companies. Since the beginning of the year, the logic of overseas expansion of the power equipment sector has been relatively sufficient, and valuations have reached a reasonably high position. Considering that the overseas expansion is still on an upward trajectory, the performance of related companies is likely to exceed expectations.