Front-loaded grid investment under the 15th Five-Year Plan plus high transformer export growth may extend the industry upcycle

Overview

The report believes China’s grid equipment industry will enter an extended upcycle jointly driven by the 15th Five-Year Plan and overseas exports. Domestically, rapid growth in renewable energy installations is increasing demand for cross-regional transmission, power system stability control, and distribution grid digitalization. Overseas, global transformer supply tightness caused by artificial intelligence data center construction, aging grid upgrades, and renewable energy grid connection creates opportunities for Chinese manufacturers to expand international market share.

Core views

First, the 15th Five-Year Plan is expected to drive moderately front-loaded construction of grid infrastructure, with nationwide grid investment of about CNY5tn and domestic grid spending likely to maintain high-single-digit annual growth in 2026–2030. Second, UHV DC remains a key solution for addressing surplus wind and solar power in Western China and improving renewable energy utilization; suppliers of converter valves, secondary equipment, converter transformers, and gas-insulated switchgear will benefit directly. Third, China’s power transformer exports remained strong in 1H26, and global supply shortages are expected to continue. Fourth, the report is positive on NARI Technology’s leadership in secondary equipment and converter valves, as well as Huaming Power Equipment’s overseas expansion and valuation appeal.

Analysis framework

The report uses a combination of top-down analysis and company comparison: first analyzing 15th Five-Year Plan policies, grid capex, and renewable energy consumption demand; then validating industry momentum with State Grid tenders and China Customs export data; and finally determining ratings and target prices based on company product positioning, overseas expansion, historical valuations, and forecast P/E ratios.

Methodology notes

• Industry and policy analysisFive-Year Plan capex analysis

  Assess the industry demand cycle through planned investment scale, construction pace, and key investment directions.

  Based on 15th Five-Year Plan renewable energy and grid planning, the report estimates nationwide and State Grid investment scale and judges that UHV, secondary equipment, and smart distribution grids will grow faster than the industry average.

• Supply-demand analysisTender and trade data validation

  Validate domestic and overseas demand strength through equipment tender value and customs export value.

  State Grid’s UHV equipment tender value has already exceeded the full-year 2025 level, while total transformer export value and both dry-type and liquid-immersed products achieved double-digit growth, jointly supporting the view that the upcycle will continue.

• Relative valuationP/E and PEG valuation

  Calculate target prices based on forecast EPS, historical P/E ratios, and earnings compound growth rates.

  Huaming Power Equipment’s target price uses 33x FY27F P/E and references 1.5x FY27F PEG; NARI Technology’s target price uses 23x FY26F P/E, consistent with its historical 12-month forward P/E average.

Asset mapping & comparison

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

• NARI Technology (600406 CH)

  Core beneficiary of UHV converter valves and secondary grid equipment, rated Buy.

  Strengths

  It has a leading position in power system stability, control, and protection equipment and is also a major supplier of UHV converter valves.

  Weaknesses

  Order growth depends on the pace of domestic grid tenders and tender-winning share in key products, while overseas business development may also be slower than expected.

  Comparison

  The current price corresponds to 19x FY27F P/E; the target price of CNY27.00 is based on 23x FY26F P/E.

  Risks

  Delays in UHV and distribution grid tenders, declines in market share of key products, and overseas market progress falling short of expectations.

• Huaming Power Equipment (002270 CH)

  Beneficiary of global transformer demand and overseas expansion, rated Buy.

  Strengths

  Overseas expansion continues to advance steadily, and the current 17.5x FY27F P/E is considered attractive.

  Weaknesses

  Domestic non-grid business is under pressure, and performance is relatively sensitive to the sustainability of overseas market expansion.

  Comparison

  The target price of CNY39.00 is based on 33x FY27F P/E and 1.5x FY27F PEG, implying about 87.8% upside versus the current price.

  Risks

  Grid investment growth below expectations, slower overseas expansion, and stricter export policies for tap changers and transformers.

• Xuji Electric (000400 CH)

  Supplier of UHV converter valves and secondary equipment; not rated in the report.

  Strengths

  Its products are directly aligned with 15th Five-Year Plan UHV DC construction and power system control demand.

  Weaknesses

  The report does not provide company-specific valuation or analysis of operating weaknesses.

  Comparison

  It is in the same beneficiary area as NARI Technology in converter valves and secondary equipment, but this report does not assign a rating.

  Risks

  Grid investment or UHV project tender implementation falling short of expectations.

• XD Electric (601179 CH), TBEA (600089 CH), and Pinggao Electric (600312 CH)

  Suppliers of converter transformers and gas-insulated switchgear, benefiting from UHV construction.

  Strengths

  Their products cover key primary equipment required for UHV line construction.

  Weaknesses

  The report does not provide detailed comparisons of individual stock valuations, order share, or earnings elasticity.

  Comparison

  They mainly benefit from demand for primary equipment, while NARI Technology and Xuji Electric focus more on converter valves and secondary equipment.

  Risks

  Delays in project approvals, tenders, and delivery schedules, as well as market share falling below expectations.

• Sieyuan Electric (002028 CH) and Jinpan Smart (688676 CH)

  Beneficiaries of growth in China’s power transformer exports and global supply shortages, marked as Buy in the report.

  Strengths

  They are expected to benefit from global transformer demand jointly driven by data center construction, aging grid upgrades, and renewable energy installations.

  Weaknesses

  The report does not provide specific target prices or valuation bases for the two companies.

  Comparison

  Together with Huaming Power Equipment, they belong to the export beneficiary theme, but differences in specific product structure and valuation are not discussed in the main text.

  Risks

  Slower overseas demand, escalation of trade restrictions, tightening export policies, and easing global supply tightness.

Key data

• 15th Five-Year Plan nationwide grid investmentApproximately CNY5tnIncluding about CNY4tn from State Grid, up about 40% from the 14th Five-Year Plan period.
• Domestic grid spending growthExpected high-single-digit average annual growth in 2026–2030UHV, secondary equipment, and smart distribution grids are expected to grow faster than the industry average.
• Grid investment in 1H26State Grid approximately CNY310bn; China Southern Grid approximately CNY89bnUp 13% and 15% YoY, respectively.
• 15th Five-Year Plan UHV DC construction15 green power linesWest-to-east power transmission capacity is expected to exceed 420GW, above 340GW at end-2025.
• State Grid UHV equipment tendersCumulative year-to-date CNY29bnAlready exceeding CNY22bn for full-year 2025.
• China power transformer exports in 1H26USD5.1bn, up 31% YoYMajor destinations include the United States, Saudi Arabia, Vietnam, Malaysia, and Indonesia.
• Dry-type transformer exportsUSD1.7bn, up 24% YoYData for 1H26.
• Liquid-immersed transformer exportsUSD3.5bn, up 35% YoYData for 1H26.
• NARI Technology valuation and target price19x FY27F P/E; target price CNY27.00Current price CNY25.07, implying upside of about 7.7%.
• Huaming Power Equipment valuation and target price17.5x FY27F P/E; target price CNY39.00Current price CNY20.77, implying upside of about 87.8%.

Impact & implications

Front-loaded domestic grid capex will improve order visibility for companies related to UHV, secondary equipment, and distribution grids; global transformer shortages will benefit Chinese manufacturers with export capabilities in gaining share. Industry benefits will not be evenly distributed, with leading companies that have key product technologies, tender share, and overseas channels benefiting more clearly. In the short term, investors should focus on tender implementation and export growth; over the medium term, they should monitor the realization of 15th Five-Year Plan investment and the earnings quality of overseas expansion.

Risks

• China’s grid investment growth falls below expectations, or tenders for UHV and distribution grid projects are delayed.
• Companies’ market share in tenders for key products such as secondary equipment, converter valves, and transformers falls below expectations.
• The pace of overseas market expansion and earnings contribution falls short of expectations.
• Geopolitical risks lead to stricter export policies for products such as tap changers and transformers.
• Domestic non-grid business remains under pressure, dragging on Huaming Power Equipment’s overall performance.
• Demand from data centers, renewable energy installations, or aging grid upgrades weakens, causing global transformer shortages to ease earlier than expected.

What to watch

• The official investment scale, project list, and degree of capex front-loading under the 15th Five-Year Plan grid plan.
• Approval, tendering, and construction start progress for 15 green power UHV DC lines.
• Fixed-asset investment and monthly equipment tender value at State Grid and China Southern Grid.
• NARI Technology’s market share in secondary equipment and converter valve tenders.
• Changes in China’s power transformer export value, product mix, and major destinations.
• Huaming Power Equipment’s overseas orders, revenue growth, and pressure on domestic non-grid business.
• Trade and export policies in the United States and other major markets targeting Chinese transformers and tap changers.