In-Depth Analysis of R&D Investment and Technological Advantages of XD Electric (601179.SS)

According to the latest data, XD Electric’s R&D investment shows a steady growth trend. From 2022 to 2024, the company’s R&D investment increased from RMB 797 million to RMB 1.041 billion, with a compound annual growth rate of approximately 14.3%[1]. In the first three quarters of 2025, R&D expenses reached RMB 690 million, a year-on-year increase of 17.76%. Based on this trend, full-year 2025 R&D investment is expected to exceed RMB 1.2 billion[2].

In terms of R&D intensity, the company’s R&D expense ratio in the first three quarters of 2025 was 4.07%, an increase of 0.22 percentage points compared with the same period last year[3]. This level is

in the power equipment industry, significantly higher than competitors such as Baobian Electric (about 2.5%) and Pinggao Electric (about 2.1%), and also has certain advantages compared to TBEA (about 2.8%) and NARI Technology (about 3.2%).

From 2020 to 2024, XD Electric’s cumulative R&D investment exceeded RMB 3.4 billion[4]. Sustained R&D investment has been converted into rich technological achievements: the company has accumulated more than 3,800 authorized patents and participated in the formulation of 76% of UHV national standards[5]. In the first half of 2025, the company added 119 authorized patents, including 60 invention patents, and revised 10 national standards and 7 international standards.

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XD Electric has built solid technological barriers in the UHV sector:

Technical Field	Technological Breakthrough	Competitive Advantage
±1100kV UHV Converter Transformer	Independently mastered core development technology	Broke foreign monopoly
750kV/800kV GIS	Fully independently developed	Leading in China
Hybrid Commutation Converter Valve	Adopts fully localized IGCT devices	Higher power density, lower loss
±800kV Flexible DC Wall Bushing	Filled domestic gap	Broke long-term foreign monopoly

In the UHV converter transformer field, the company’s market share exceeds 35.5%, firmly ranking first in the industry; in the State Grid’s UHV equipment bidding, the company’s share reached 24.9% in 2024, and ranked first with an overall share of 18.7% in 2025[6].

XD Electric’s technological advantages in the solid-state transformer sector are particularly prominent:

• The only domestic enterprise
  to achieve large-scale application of 2.4MW-class SST
• Globally launched
  the 4MW grid-connected photovoltaic solid-state transformer in October 2025
• The 800VDC architecture SST for the Guian Data Center under the “East Data West Computing” project has completed verification
• System efficiency exceeds 97.5%, no no-load loss at night, increasing annual power generation gain by nearly 2%
• Accounts for
  more than 60% of the domestic high-end market
  [7]

Its subsidiary Xi’an High Voltage Apparatus Research Institute (XDRI) owns the

, forming a monopolistic advantage in testing services and providing a stable high-margin revenue source for the company. This unique resource further strengthens the company’s technological barriers and industry voice.

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Sustained R&D investment is being converted into tangible improvements in profitability:

Indicator	2022	First Three Quarters of 2025	Change
Gross Margin	16.43%	22.14%	+5.71pp
Net Margin	3.96%	6.95%	+2.99pp
ROE	-	5.39%	-

The significant increase in gross margin is mainly due to

– the proportion of high-margin UHV equipment and flexible DC products continues to increase, while the low-margin engineering contracting business has been actively reduced[8].

The company’s period expense ratio in the first three quarters fell to 13.1%, a year-on-year decrease of 0.3 percentage points. Among them, the sales expense ratio was 2.92%, a year-on-year decrease of 0.6 percentage points, indicating continuous improvement in channel efficiency. Achieving a decrease in expense ratio while maintaining growth in R&D investment reflects the company’s excellent operational management capabilities.

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1. Industry-leading R&D investment intensity
   : The R&D expense ratio of 4.07% is relatively high in the industry, providing financial support for continuous technological innovation
2. Profound technical accumulation
   : With over 3,800 authorized patents and participation in formulating 76% of UHV standards, a strong technological moat has been formed
3. In-depth customer binding
   : Deeply bound with State Grid and China Southern Power Grid, grid investment exceeding RMB 820 billion in 2025 provides sufficient order guarantees for the company
4. Abundant orders in hand
   : Contract liabilities reached RMB 5.066 billion, a year-on-year increase of 29%, providing high visibility for revenue growth in the next 1-2 years
5. Sufficient production capacity guarantee
   : The smart industrial base was officially put into operation in October 2025, equipped with 5G and digital systems, breaking through production capacity bottlenecks

1. Cash flow pressure
   : The net cash flow from operating activities in the first three quarters of 2025 was RMB 555 million, a year-on-year decrease of 60.44%; attention should be paid to capital turnover efficiency
2. Intensified competition
   : NARI Technology has a leading market share in the converter valve sector, and competitors such as TBEA and Baobian Electric continue to catch up
3. R&D efficiency conversion
   : Although the number of patents is large, attention should be paid to the conversion efficiency from technological breakthroughs to commercial implementation

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Based on comprehensive assessment, XD Electric’s R&D investment ratio of around 4% is

in the power equipment industry. Combined with its profound technical accumulation, patent barriers and standard-setting rights, its technological advantages have . In 2025, the company ranked first with a winning bid amount of RMB 1.005 billion in the Tibet-Guangdong UHV DC project[9], fully verifying its technological competitiveness.

The company’s “all-round player” product line layout (covering a full range of core equipment such as transformers, high-voltage switches, converter valves, and capacitors) combined with cutting-edge technological breakthroughs in solid-state transformers and flexible DC has formed a differentiated competitive advantage. The world’s only UHV testing platform also provides a unique monopolistic revenue source.

Investors should continue to pay attention to: 1) Improvement of cash flow; 2) Commercial conversion efficiency of R&D investment; 3) Policy changes in UHV construction planning; 4) Progress of overseas business expansion (overseas revenue increased by 64.05% year-on-year in the first half of 2025).

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[1] Eastmoney.com - In-Depth Research Report on XD Electric (https://caifuhao.eastmoney.com/news/20251213132235500126590)

[2] Tencent News - XD Electric Secures RMB 8.3 Billion in Orders (https://news.qq.com/rain/a/20251226A020BW00)

[3] Eastmoney.com - In-Depth Research Report on XD Electric (https://caifuhao.eastmoney.com/news/20251213132235500126590)

[4] Tencent News - XD Electric Secures RMB 8.3 Billion in Orders (https://news.qq.com/rain/a/20251226A020BW00)

[5] Eastmoney.com - In-Depth Research Report on XD Electric (https://caifuhao.eastmoney.com/news/20251213132235500126590)

[6] Eastmoney.com - In-Depth Research Report on XD Electric (https://caifuhao.eastmoney.com/news/20251213132235500126590)

[7] Eastmoney.com - Why XD Electric Remains the Industry Leader (https://caifuhao.eastmoney.com/news/20260111071713691651610)

[8] Tencent News - XD Electric Secures RMB 8.3 Billion in Orders (https://news.qq.com/rain/a/20251226A020BW00)

[9] Tencent News - XD Electric Secures RMB 8.3 Billion in Orders (https://news.qq.com/rain/a/20251226A020BW00)

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Report Generation Date: January 15, 2026
Data Sources: Jinling API, Eastmoney, Tencent News, etc.