Goldman Sachs Reiterates Buy on Sieyuan Electric: Phase III Expansion Locks in High Export Growth

Overview

Goldman Sachs released a research report commenting on Sieyuan Electric's (002028.SZ) announcement of its Phase III transformer factory expansion plan. The report believes this capital expenditure clearly validates the visibility of the company's medium-term export growth and provides solid support for its capacity ramp-up in 2028-2029. Given the persistent global shortage of power transformers and Sieyuan Electric's competitive advantages in delivery speed and overseas certifications, Goldman Sachs reiterates its "Buy" rating and maintains its target price of CNY 223.9.

Core views

Capacity Expansion and Export Outlook: On June 16, 2026, Sieyuan Electric announced an investment of CNY 480 million to build a Phase III transformer factory. Referencing the construction cycle of the Phase II factory (started in November 2024, commenced production in November 2025), Goldman Sachs expects the Phase III project to take about one year, starting production in the second half of 2027. This investment is expected to add capacity for approximately 300 oil-immersed transformers. Based on an average selling price (ASP) of over CNY 10 million per unit, this will generate annual output value exceeding CNY 3 billion, significantly enhancing the company's export outlook. Combined with Phase II (approx. 400 units) and Phase III capacity, Sieyuan Electric's total transformer capacity will support an annual output value of approximately CNY 9-10 billion, sufficient to support Goldman Sachs' revenue forecasts of CNY 8.2 billion for 2028 and CNY 10.6 billion for 2029 for power transformers. Competitive Advantages Amid Global Shortage: Global transformer lead times remain high at around 128 weeks, while industry capacity expansion typically takes 2-3 years. In contrast, benefiting from China's agile supply chain, Sieyuan Electric can deliver transformers within 6-9 months (24-36 weeks) and complete capacity expansion within about one year. This "time-to-market" advantage, coupled with progress in overseas execution and certifications, helps the company continue to gain share in the global market. Long-term Growth Logic: Goldman Sachs expects that driven by the global grid upgrade cycle (aging infrastructure, economic development, renewable energy drivers), Sieyuan Electric's export revenue CAGR will reach 43% from 2025 to 2030. Specifically in switchgear and power transformers, market share is expected to rise from 6%/1% in 2025 to 8%/6% in 2030. Additionally, the company has achieved breakthroughs with U.S. data center operators, with U.S. revenue expected to account for 26%-30% of overseas revenue from 2026 to 2028, contributing to overall margin improvement through high-profit contributions. The report believes the global transformer supply shortage will last at least until 2030, and the global grid upgrade trend will persist at least until 2040-2050.

Analysis framework

Goldman Sachs' analysis primarily revolves around two main themes: "supply-demand mismatch" and "capacity realization." First, by comparing the global average lead time (128 weeks) with the company's delivery capability (6-9 months), it quantifies Sieyuan Electric's relative competitive advantage in a shortage environment. Second, it adopts a "volume-price breakdown" method, estimating the commissioning timing of new capacity based on historical construction cycles, and combining it with ASP to estimate additional output value, thereby validating the support of capacity expansion for revenue forecasts. Finally, starting from downstream demand structure, it segments traditional grid upgrades and emerging data center (AIDC) demand, paying particular attention to breakthroughs in the high-margin U.S. market, to argue for the sustainability of margin uplift and long-term growth.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  By analyzing the supply rigidity (long expansion cycles) and demand elasticity (grid upgrades + AI data centers) of the global transformer market, it determines that the industry is in a state of excess demand, thereby deriving that companies with fast delivery capabilities will achieve excess returns.

• Industry/Sector Analysis FrameworkVolume-Price Breakdown

  Volume-Price Breakdown

  Decomposes revenue growth into two dimensions: "production volume (number of units)" and "average selling price (ASP)," separately estimating the volume increment brought by new factories and product unit prices, thereby more accurately forecasting future output value and revenue scale.

• Valuation MethodPE/PEG valuation

  Forward P/E Discounting

  Uses the forecasted earnings per share for the target year (2028) multiplied by the given P/E multiple (25x) to obtain the terminal value, which is then discounted back to the current or previous year using the cost of equity (10%) to determine the target price. This method is commonly used for high-growth stocks to reflect future earnings potential.

Asset mapping & comparison

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

• Sieyuan Electric (002028.SZ)

  Direct Beneficiary: Amid the global transformer shortage, capacity expansion accelerates export growth, and breakthroughs in the U.S. data center business bring high-margin contributions.

  Strengths

  Fast delivery speed (6-9 months vs. global 128 weeks), agile supply chain, comprehensive overseas certifications, recognized product quality.

  Comparison

  Compared to global competitors, it has significant lead time advantages and cost control capabilities; compared to domestic peers, it has a first-mover advantage in accessing overseas high-end markets (such as the U.S.).

  Risks

  Overseas execution risks, margins falling short of expectations, slowdown in data center construction.

Key data

• Phase III Expansion InvestmentCNY 480 millionFor building a new transformer factory
• New CapacityApprox. 300 unitsOil-immersed transformers, expected to commence production in H2 2027
• Global Transformer Lead TimeApprox. 128 weeksIndustry average, highlighting Sieyuan Electric's advantage of 6-9 month delivery
• Export Revenue CAGR Forecast43%Compound annual growth rate for 2025-2030
• U.S. Revenue Share Forecast26%-30%As a percentage of total overseas revenue, expected for 2026-2028
• Target PriceCNY 223.9Based on discounting 25x P/E ratio for 2028

Impact & implications

The research report believes that Sieyuan Electric's Phase III expansion is not just a physical increase in capacity, but also a signal of the deepening of its globalization strategy. Driven by the dual forces of aging grids in Europe and the U.S. and AI data center construction, leading Chinese companies with fast delivery capabilities and high-quality certifications will substantially benefit from global supply chain restructuring. This move will further consolidate Sieyuan Electric's position in overseas high-end markets, especially with breakthroughs in the U.S. data center customer base, which is expected to improve the company's product mix and profit margins, transforming it from a pure equipment manufacturer into a core supplier of global grid solutions.

Risks

• Overseas execution risks: Including geopolitical issues, trade barriers, or projects falling short of expectations.
• Margin pressure: Raw material price fluctuations or intensified competition may lead to gross margins below expectations.
• Demand slowdown: A slower pace of global data center construction could affect transformer demand.

What to watch

• Progress of Phase III factory construction and commencement of production in the second half of 2027.
• Order acquisition from U.S. data center customers and changes in revenue share.
• Changes in global transformer lead times and raw material price trends.