Doubling data center orders and approximately 30% growth in domestic grid orders drive upgrades to TGOOD's earnings forecasts and target price

Overview

This report summarizes the key takeaways from TGOOD's 1H26 non-deal roadshow. JPMorgan believes accelerating data center orders, steady growth in domestic power grid and industrial orders, and the gradual advancement of large prefabricated substation projects in Saudi Arabia are the main reasons supporting its Overweight rating; weak new energy demand is partly offset by the company's market share gains.

Core views

The data center business was the most prominent incremental growth driver discussed during the meetings. The company's data center orders increased from Rmb500mn in both 2025 and 1H26 to Rmb1bn in the first 8 months of 2026, with most currently coming from China. Southeast Asia is a near-term focus, and the company plans to follow Chinese customers expanding overseas by providing power supply solution packages for their data center projects. Management expects several high-value projects to enter the implementation stage and create revenue opportunities in 2026. North America remains in the preparation and observation phase, with no substantive progress yet, although the company has been actively discussing the supply of 110kV prefabricated substations to data centers with US cloud service providers. The report believes there is a potential supply gap for high-voltage prefabricated substations in North America. US data centers typically connect at 35kV, not because they are unwilling to use solutions above 110kV, but because substation supply capacity, particularly for prefabricated equipment, is tight. TGOOD has begun serving data center operators and EPC contractors and has made early progress. It can integrate already-certified transformer and switchgear brands according to customer preferences. Its differentiated capability lies in providing an integrated modular skid-mounted solution covering equipment segmentation, layout, cabling, and interconnection. Management said that global major manufacturers have yet to offer a complete solution due to the complexity of system execution. Domestic orders remained resilient despite industry headwinds. The company's total orders grew by approximately 5%—10% year-on-year, with the renewable energy business being the primary drag: industry installations fell by approximately 60% in 1H26, while the company's related orders declined by approximately 20%, with the smaller decline reflecting market share gains. Grid-side orders grew by more than 30% year-on-year, benefiting from a higher share at China Southern Power Grid, more favorable tender policies, and increased grid adoption of prefabricated solutions. Orders from non-grid customers such as industrial companies and data centers also grew by approximately 30% year-on-year. Beyond data centers, industries such as petroleum, coal, and chemicals, as well as state-owned enterprises, are replacing traditional civil-construction substations with prefabricated solutions. The key near-term catalyst for overseas expansion comes from Saudi Arabia. The company has completed pre-tender preparations, including factory audits, inspections, and shortlisting, and successfully entered the candidate list for Saudi projects below 380kV in June 2026, reportedly becoming the first Chinese and even global company to qualify in this category. It is currently waiting for Saudi Energy to launch the tenders, with the timing determined by the counterparty, but management believes order visibility is already relatively high. Saudi Arabia's five-year plan includes 126 standardized prefabricated substations, with the first batch of approximately 20 expected to be tendered in 2026. If the approximately 50% win rate achieved last year continues, the company is targeting approximately 10 units, corresponding to an order value of approximately Rmb2bn—Rmb3bn and an expected gross margin of approximately 35%—40%. If the large project package is tendered before year-end, the company's overseas orders in 2026 could exceed approximately Rmb3.0bn, versus approximately Rmb1.2bn in 2025. As revenue is expected to be recognized mainly in 2027, overseas revenue in 2026 could still remain flat or decline slightly. Outside Saudi Arabia, management expects overseas orders to roughly double as Europe and Australia improve. The competitive landscape also supports the report's order outlook. There are approximately five major suppliers in the high-voltage prefabricated substation market, most of them from China. Several Chinese companies participated in the Saudi projects, with TGOOD securing approximately half of the related work. Hitachi can supply high-voltage prefabricated substations, but it faces longer delivery lead times and higher costs; global equipment manufacturers such as Siemens focus more on individual products such as switchgear and GIS. The report believes that if global manufacturers enter the prefabricated substation market above 100kV, they will require a lengthy period to accumulate technical and execution experience, by which time Chinese suppliers may already dominate the market. The company's medium-term investment thesis also includes domestic power grid investment, electric vehicle charging, and optionality from new technologies. The report states that TGOOD is a global leader in prefabricated substation manufacturing and operates China's largest new energy vehicle charging network, with a market share exceeding approximately 20%. The charging business has shifted to an asset-light model, and profit attributable to the company continues to grow; data center contracts and the development of HVPAC/SST technologies represent growth options that are not yet fully priced in. Based on electrical equipment order momentum and data center business tailwinds, JPMorgan raised its 2026—2028 earnings forecasts by 1%—5%. The 2027 adjusted net profit forecast was increased by 4.6%, from Rmb1,888mn to Rmb1,976mn. The report expects revenue to increase from Rmb15,786mn in 2025 to Rmb17,094mn, Rmb19,211mn, and Rmb21,274mn in 2026, 2027, and 2028, respectively. Adjusted net profit is expected to rise from Rmb1,243mn to Rmb1,565mn, Rmb1,976mn, and Rmb2,374mn over the same period, while adjusted earnings per share are expected to increase from Rmb1.18 to Rmb1.48, Rmb1.87, and Rmb2.25. Gross margin is projected to rise from 27.4% in 2025 to 28.7% in 2028, EBITDA margin from 14.0% to 16.8%, and ROE from 15.5% to 19.0%. Regarding valuation, the report states that the company trades at less than 20 times one-year forward earnings, while its earnings CAGR for 2026—2028 is approximately 23%, making the valuation attractive. The Rmb42/share June 2027 target price is based on a sum-of-the-parts valuation: the electrical equipment business is benchmarked against comparable companies and assigned approximately 20 times forecast 2027—2028 P/E, while the new energy vehicle charging business is also assigned approximately 20 times P/E due to its improving earnings outlook. The target price was raised from Rmb40 to Rmb42, while the Overweight rating remained unchanged.

Analysis framework

The report first uses management's non-deal roadshow discussions to break down changes in data center, power grid, renewable energy, industrial customer, and overseas orders, then explains order sustainability through supply capacity, product integration, tender progress, and the competitive landscape. It subsequently maps order momentum to the 2026—2028 earnings forecasts and applies separate P/E-based valuations to the electrical equipment and new energy vehicle charging businesses to derive the target price.

Methodology notes

• Valuation MethodSOTP Valuation

  Sum-of-the-parts valuation

  The report separately values the electrical equipment and new energy vehicle charging businesses and then aggregates them to determine the Rmb42/share target price.

• Valuation MethodP/E and PEG Valuation

  Comparable-company P/E valuation

  The electrical equipment business is benchmarked against peers and assigned approximately 20 times forecast 2027—2028 P/E, while the charging business is also assigned approximately 20 times P/E due to its improving earnings outlook.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Analysis of prefabricated substation supply, demand, and capacity constraints

  The report explains TGOOD's data center order opportunities through tight supplies of high-voltage substations in North America, the lack of complete solutions from global manufacturers, and growing customer demand.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Decomposition of order growth by business source

  The report separately compares changes in renewable energy, power grid, industrial, and data center orders to identify the structural strengths and weaknesses behind total order growth.

• Quantitative/Factor/Portfolio TheoryStyle factor analysis

  Value, growth, momentum, quality, and low-volatility style exposures

  The report presents the company's quantitative style rankings and correlations with factors such as growth and momentum as supplementary descriptions of the stock's style characteristics.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Qingdao TGOOD Electric (TGOOD, 300001.SZ)

  Growth in data center, power grid, and overseas prefabricated substation orders is the main positive driver, while declining new energy demand is a near-term drag.

  Strengths

  Strong integrated delivery capabilities for prefabricated substations; market share in the domestic power grid and charging network; secured approximately half of the related work in Saudi projects; and the charging business has shifted to an asset-light model.

  Weaknesses

  Revenue from overseas orders in 2026 will mainly be recognized in 2027, while the North American business remains in the preparation and observation phase with no substantive progress yet.

  Comparison

  Hitachi faces longer delivery lead times and higher costs, while global manufacturers such as Siemens mainly provide individual equipment products; TGOOD can provide complete modular, end-to-end prefabricated solutions.

  Risks

  Charging pile utilization or electrical equipment demand may fall below expectations, overseas expansion may be slower than expected, and growth in data center-related businesses may be slower than expected.

Key data

• Data center ordersRmb1bnFirst 8 months of 2026; Rmb500mn in both 2025 and 1H26
• Domestic total order growthApproximately 5%—10% year-on-yearPrimarily dragged by the renewable energy business
• Grid-side order growthMore than 30% year-on-yearDriven by a higher share at China Southern Power Grid, tender policies, and greater penetration of prefabricated solutions
• Non-grid customer order growthApproximately 30% year-on-yearIn 1H26, mainly driven by data centers and industries such as petroleum, coal, and chemicals
• Change in renewable energy industry installationsApproximately -60%1H26
• Change in the company's renewable energy ordersApproximately -20%The decline was significantly smaller than the industry installation decline, reflecting market share gains
• Saudi five-year plan126 unitsStandardized prefabricated substations, with the first batch of approximately 20 expected to be tendered in 2026
• Target Saudi ordersApproximately 10 units, Rmb2bn—Rmb3bnAssuming the approximately 50% win rate continues, with an expected gross margin of approximately 35%—40%
• Potential overseas orders in 2026More than approximately Rmb3.0bnConditional on the large Saudi project package being tendered before year-end; approximately Rmb1.2bn in 2025
• Earnings forecast revisionRaised by 1%—5%Covering 2026—2028
• 2027 adjusted net profit forecastRmb1,976mnPreviously Rmb1,888mn, raised by 4.6%
• 2026—2028 adjusted earnings per shareRmb1.48, Rmb1.87, Rmb2.25Corresponding to year-on-year growth of 25.9%, 26.2%, and 20.2%
• 2026—2028 revenue forecastsRmb17,094mn, Rmb19,211mn, Rmb21,274mnCorresponding to year-on-year growth of 8.3%, 12.4%, and 10.7%
• 2026—2028 adjusted net profit forecastsRmb1,565mn, Rmb1,976mn, Rmb2,374mnRmb1,243mn in 2025
• 2028 gross margin, EBITDA margin, and ROE28.7%, 16.8%, 19.0%27.4%, 14.0%, and 15.5%, respectively, in 2025
• 2026—2028 earnings CAGR23%Used by the report to support its assessment of valuation attractiveness
• One-year forward P/EBelow 20 timesThe report considers it attractive relative to the growth outlook
• New energy vehicle charging network shareApproximately more than 20%The report describes it as China's largest new energy vehicle charging network
• Target priceRmb42/shareJune 2027 target price, previously Rmb40/share
• Reference share priceRmb36.32As of August 25, 2026

Impact & implications

The report believes the company has offset part of the downturn in the new energy industry through market share gains and is leveraging its integrated prefabricated substation delivery capabilities to enter data center and overseas high-voltage projects. Order growth is expected to translate into revenue and profit mainly from 2027 onward, particularly for the Saudi projects. The corresponding earnings upgrades, margin improvements, and approximately 23% earnings CAGR for 2026—2028 support the target price increase.

Risks

• New energy vehicle charging pile utilization is lower than expected.
• Electrical equipment demand is lower than expected.
• Overseas expansion progresses more slowly than expected.
• Data center-related business growth is slower than expected.

What to watch

• Monitor the timing of Saudi Energy's launch of tenders for the first batch of approximately 20 prefabricated substations and the company's actual win rate.
• Monitor whether Saudi orders can be secured before the end of 2026 and whether revenue is recognized mainly in 2027 as expected.
• Monitor the implementation progress of high-value data center projects in Southeast Asia during 2026.
• Monitor whether the company's discussions with US cloud service providers and EPC contractors can convert into project orders above 110kV.
• Monitor whether growth in power grid, industrial, and data center orders can continue to offset weak renewable energy demand.
• Monitor utilization and growth in profit attributable to the company following the new energy vehicle charging business's asset-light transformation.