Main Force Capital Accumulation in the Power Equipment Sector: In-Depth Analysis of Industry Logic and Investment Sustainability

Based on the above in-depth analysis, I present to you a complete analysis report on the continuous capital accumulation by main forces in the power equipment sector:

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The power equipment sector has recently seen continuous capital accumulation by main forces, mainly driven by

three core logics. Given the support from long-term planning for new power system construction and the sector’s valuation remaining in a historically low range, the capital accumulation behavior has a certain degree of , but key indicators such as order fulfillment and changes in gross profit margin need to be closely monitored.

The chart above shows the analysis of investment drivers, sustainability assessment, prosperity comparison of sub-sectors, as well as capital flow and valuation trends of the power equipment sector.

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According to recent market data, the power equipment sector, together with the computer, non-ferrous metals, national defense and military industry, and mechanical equipment sectors, constitutes the main direction of main force capital inflows, while sectors such as communications, electronics, banking, household appliances, and food and beverage show net outflows.

Capital Flow Characteristics	Market Implications
Capital shifts from high-valuation to low-valuation sectors	Market risk appetite declines, with a focus on certain returns
Rotation from TMT to manufacturing	Crowded technology sectors are sold off, while manufacturing gains favor
Counter-cyclical attributes are recognized	Power grid investment is valued as an important tool for stable growth

At the individual stock level, targets such as

have seen significant capital accumulation by main forces, while previously popular targets such as have been sold off, reflecting the capital rotation from high-valuation, crowded trading sectors to low-valuation manufacturing sectors with clear policy support.

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• Continuous advancement of the “Dual Carbon” goals
  : The construction of new power systems has been elevated to a national strategy, accelerating energy structure transformation
• Prominent counter-cyclical adjustment role
  : Power grid investment has become an important tool for stable growth, with high growth certainty in the 2025 investment plan
• Supported by energy security strategy
  : There is an urgent demand for power infrastructure upgrading, accelerating the construction of UHV projects

Policy Type	Specific Content	Impact on the Sector
New power system planning	Building a clean, low-carbon, safe and efficient energy system	High certainty of long-term demand
UHV construction	Launch of a new round of transmission channel construction	Directly drives equipment demand
Distribution network transformation	Intelligent and digital upgrading	Smart meters and distribution automation benefit

1. New energy grid connection demand
   : Wind power and photovoltaic installed capacity continue to grow, driving demand for power grid transformation
2. UHV construction peak
   : Accelerated construction of cross-regional transmission channels, driven by new energy consumption pressure
3. Intelligent transformation of distribution networks
   : Demand for distributed energy access is released, with huge space for intelligent transformation
4. Energy storage supporting demand
   : Driven by new energy supporting energy storage policies, demand for energy storage equipment grows rapidly

Sub-Sector	Expected Annual Growth Rate	Core Driving Factors
UHV equipment	25%+	Cross-regional transmission of new energy
Smart meters	15-20%	Launch of replacement cycle
Distribution automation	15-20%	Urbanization construction
Energy storage equipment	30%+	Driven by supporting energy storage policies

• Revenue side improvement
  : The growth rate of power grid investment rebounded significantly in 2024, accelerating the pace of order delivery
• Cost side stabilization
  : Prices of raw materials (copper, aluminum, steel) have retreated from highs, leaving room for gross profit margin recovery
• Expense ratio optimization
  : Scale effects are released, with management expense ratio and sales expense ratio expected to decline further

• Historically low range
  : The PE of the power equipment sector is at a historical low, with limited downside risk
• Significant valuation discount
  : There is a significant discount compared to the new energy sector, with sufficient safety margin
• Room for institutional position increase
  : Compared to popular sectors such as TMT, the proportion of institutional holdings still has room for growth
• High dividend attractiveness
  : Leading companies have favorable dividend yields, attracting long-term capital

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Supporting Factors	Support Degree	Core Logic
High policy certainty	85%	The new power system construction plan is long-term, and power grid investment is a key focus of the “14th Five-Year Plan”
Good performance fulfillment	75%	Power grid order execution cycles are long, with high performance certainty; leading enterprises have sufficient order reserves
Sufficient valuation safety margin	80%	The sector’s PE is at a historical low, and leading companies have favorable dividend yield protection
Capital side still has support	70%	Institutional holdings are relatively low, and long-term funds such as social security and insurance prefer such targets

Risk Factors	Risk Degree	Response Strategies
Macroeconomic fluctuation risk	40%	Monitor macroeconomic data; power grid investment has certain counter-cyclical attributes
Raw material price fluctuation risk	30%	Track commodity trends; select targets with stable gross profit margins
Risk of intensified industry competition	25%	Focus on leading enterprises; avoid low-end product competition
Accounts receivable recovery risk	20%	Monitor cash flow status; prioritize targets with strong collection capabilities

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• Construction Logic
  : Accelerated construction of cross-regional transmission channels, with strong demand for new energy consumption
• Competitive Landscape
  : Core equipment such as converters and transformers have high barriers, with high concentration of leading enterprises
• Growth Expectation
  : Annual growth rate is expected to remain above 25%
• Gross Profit Margin Level
  : 18-22%, with strong profitability

• Construction Logic
  : Demand for intelligent transformation of distribution networks is released, driven by distributed energy access
• Competitive Landscape
  : There are many sub-sectors, with relatively scattered competition
• Growth Expectation
  : Annual growth rate is expected to remain 15-20%
• Gross Profit Margin Level
  : 15-18%, relatively stable

• Construction Logic
  : Driven by new energy supporting energy storage policies, energy storage installed capacity grows rapidly
• Competitive Landscape
  : The industry is in a rapid development stage, with an unstable competitive landscape
• Growth Expectation
  : Annual growth rate is expected to remain above 30%
• Gross Profit Margin Level
  : 20-25%, with room for improvement

• Construction Logic
  : Urbanization drives growth in distribution network investment
• Competitive Landscape
  : Competition is relatively fierce, with room for concentration improvement
• Growth Expectation
  : Annual growth rate remains 10-15%
• Gross Profit Margin Level
  : 12-15%, relatively stable

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The power equipment sector has

, and it is recommended to accumulate on dips:

Time Horizon	Investment Logic
Short-term (1-3 months)	Valuation recovery driven by market style rotation
Medium-term (3-6 months)	Performance improvement driven by order fulfillment
Long-term (6-12 months)	Continuous advancement of new power system construction

Allocation Ratio	Allocation Direction	Specific Target Characteristics
Core allocation (60%)	Leading UHV equipment, leading energy storage equipment	With core technological barriers and full order books
Satellite allocation (30%)	High-quality targets in smart power grids and distribution equipment	Sub-sector leaders with reasonable valuations
Cash position (10%)	To cope with market volatility	Maintain flexibility and seize accumulation opportunities

• Leading Enterprises
  : Scale effects from market share expansion
• Gross Profit Margin Improvement
  : Stabilized raw material prices + product structure upgrading
• Order Structure
  : High proportion of orders from high-prosperity sectors such as UHV/energy storage
• Overseas Expansion
  : Power grid construction demand in countries along the Belt and Road

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1. Risk of power grid investment falling short of expectations
   : If the macroeconomy declines significantly, it may affect the pace of power grid investment
2. Risk of sharp fluctuations in raw material prices
   : Raw materials such as copper and aluminum account for a high proportion of costs, and price fluctuations affect gross profit margins
3. Risk of intensified industry competition
   : Price wars may erode profit margins
4. Risk of weakened policy support
   : Monitor the impact of policy changes on sector valuation

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The continuous capital accumulation by main forces in the power equipment sector is supported by

, with the resonance of three factors: policy-driven growth, demand expansion, and valuation recovery, providing medium-term upward momentum for the sector. In terms of investment sustainability, , but it is necessary to closely monitor order fulfillment progress, changes in gross profit margins, and macro policy trends. It is recommended that investors focus on three high-prosperity sub-sectors: , and prioritize leading enterprises with core technological barriers and order advantages for allocation.

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