Fund Rotation Creates 'Golden Pit'—Buy Quality Stocks in Power Equipment and Wind Power on Dips
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Fund Rotation Creates 'Golden Pit'—Buy Quality Stocks in Power Equipment and Wind Power on Dips
J.P. Morgan points out that, affected by fund rotation and geopolitical risks, Asian power equipment and Chinese wind power sectors have experienced sharp corrections. However, fundamentals remain solid and valuations have fallen back to reasonable levels. We recommend buying quality stocks on dips; meanwhile, we believe the reopening of the Strait of Hormuz will not significantly weaken demand for energy storage.
- Asian power equipment and Chinese upstream wind power sectors have corrected by 20-30% from their April highs, mainly due to fund rotation, concerns over delayed data center grid connections, and EU trade risks.
- The correction reflects a lack of funding and short-term catalysts, but structural demand for utilities and grids remains strong.
- Chinese wind power companies are minimally affected by EU tariffs (less than 10% market share). Domestic offshore wind targets are clear, and fundamentals are improving.
- Oriental Cable announced new orders worth 5.2 billion yuan, offering attractive valuations. We reiterate our overweight rating; Goldwind Technology's H-shares were also oversold, and its wind turbine profitability is expected to improve.
- The reopening of the Strait of Hormuz caused fluctuations in Deye Holdings' stock price, but institutions expect oil prices won't fall sharply. Demand for distributed photovoltaic energy storage (DG ESS) remains resilient.
Report interpretation
Overview
J.P. Morgan released a report pointing out that, recently, due to fund rotation shifting toward AI themes, concerns about delayed data center grid connections, and geopolitical tensions, Asian power equipment and Chinese upstream wind power sectors have experienced significant corrections. However, institutions believe this isn't a deterioration of fundamentals but rather an opportunity to accumulate high-quality stocks. Additionally, regarding the news of the Strait of Hormuz reopening, the report analyzes that it won't significantly drag down demand for distributed photovoltaic energy storage (DG ESS); the short-term emotional impact is actually an opportunity to add positions.
Core views
Power equipment sector correction offers buying opportunities: Chinese and Korean power equipment stocks have corrected by 20-30% from their April highs, mainly due to insufficient funding and short-term catalysts. However, underlying demand for utilities and grids remains intact. Institutions are optimistic about Xiaoxing Heavy Industry (over 90% of new orders come from the U.S., little affected by data center delays, with a projected P/E ratio of around 25x in 2028) and Wison Holding (limited EU tariff risk, expected earnings growth exceeding 20%, forward P/E ratio of only about 12x). Improving fundamentals in China’s wind power sector: Although affected by EU trade tensions and fund rotation, domestic offshore wind visibility is increasing. The government has proposed national offshore wind targets for 2030 for the first time, and local governments may launch new projects as early as the second half of 2026. Oriental Cable is minimally impacted by the EU; after announcing new orders worth 5.2 billion yuan, its stock price decline of over 30% appears unreasonable. Its current fiscal year 2027 expected P/E ratio is only 14x, corresponding to over 30% compound earnings growth. Institutions maintain an overweight rating. Goldwind Technology's H-shares were also oversold due to limited EU exposure, and its wind turbine business profitability is expected to improve. We recommend buying on dips. Resilient demand for energy storage (DG ESS): Affected by the news of the Strait of Hormuz reopening, Deye Holdings' stock price fluctuated. However, institutions predict that, driven by strong inventory rebuilding demand, oil prices are unlikely to drop sharply (the average Brent crude oil price in 2026 is expected to be $96 per barrel). High oil prices will continue to push up diesel prices, accelerating the rapid adoption of distributed photovoltaic energy storage. Moreover, referring to Europe’s 2022 energy crisis experience, supply disruptions often become catalysts for users adopting photovoltaic energy storage, and even after energy prices normalize, demand remains resilient.
Analysis framework
The report follows the main line of ‘Event Impact and Fund Behavior Analysis -> Fundamental Rebuttal -> Valuation Attractiveness Assessment’. First, it attributes the sharp stock price correction to non-fundamental factors—fund rotation toward AI themes and emotional concerns—rather than a deterioration in industry demand. Second, by dissecting the actual risk exposures of each sub-sector (such as China’s wind power and power equipment having extremely low market shares in the EU), it disproves the substantial negative impact from trade friction. Finally, combining the latest order data and earnings growth forecasts, and using valuation metrics like P/E ratios, it demonstrates that the current correction has created safe-margin buying opportunities. For the energy storage sector, through analogy with historical events and calculation of investment payback periods, it proves the intrinsic resilience of long-term demand.
Methodology notes
Assessing the substantive impact of sudden events on industry long-term logic
The report analyzed the short-term emotional impact of the Strait of Hormuz reopening on the energy storage sector and, drawing on similar historical events (Europe’s 2022 energy crisis), concluded that it wouldn’t substantially weaken long-term demand, thus identifying mispriced buying opportunities arising from the event’s impact.
Differentiating fund rotation noise from industry fundamental trends
The report attributed the declines in Asian power equipment and wind power sectors to fund rotation toward AI-themed sectors, reminding investors to distinguish between short-term fund behavior and long-term industry trends and take advantage of valuation gaps created by capital outflows.
Economic drivers behind alternative energy demand
When analyzing demand for distributed photovoltaic energy storage, the report pointed out that high oil and diesel prices (costs on the traditional energy supply side) will drive users toward photovoltaic systems (demand-side substitution), thus proving the economic viability of photovoltaic energy storage under specific energy price conditions.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Xiaoxing Heavy Industry (298040.KS)Benefit Logic: Strong demand for power equipment, little affected by data center grid connection delays.
- Strengths
- Over 90% of new orders come from U.S. utilities/grids, solid fundamentals.
- Wison Holding (3393.HK)Benefit Logic: China’s smart meter leader, overseas expansion and recovery of grid tenders driving growth.
- Strengths
- Limited EU tariff risk (Chinese manufacturers’ market share less than 10%), fast earnings growth, attractive valuation.
- Oriental Cable (603606.SS)Benefit Logic: Recovery of China’s offshore wind demand and project advancement.
- Strengths
- Negligible EU exposure, newly secured 5.2 billion yuan orders, high barriers to entry and strong profitability in the submarine cable industry.
- Goldwind Technology (2208.HK)Benefit Logic: Improved wind turbine generator profitability and growth in export sales.
- Strengths
- Limited EU exposure, valuation has fallen significantly and now offers a safety margin.
- Risks
- Geopolitical and trade sentiment disturbances
- Deye Holdings (605117.SS)Benefit Logic: Strong growth in emerging markets’ distributed photovoltaic energy storage (DG ESS).
- Strengths
- Early-mover advantage and cost leadership in emerging markets, high oil prices highlight the economic viability of photovoltaic energy storage.
- Risks
- Recent oil price volatility may cause short-term stock price fluctuations
Key data
- Sector Correction幅度20%-30%Asian power equipment and Chinese wind power sectors fell from their April highs
- Oriental Cable New Orders5.2 billion yuanRMB, confirming domestic offshore wind demand
- 2026 Brent Crude Oil Average Forecast Price96 USD/barrelInstitutions expect oil prices won't fall sharply, supporting the economics of photovoltaic energy storage
- Oriental Cable Expected Valuation and Growth Rate14x / >30%Fiscal year 2027 expected P/E ratio of 14x, compound annual earnings growth rate from 2025-27 exceeding 30%
- Wison Holding Expected Valuation and Growth Rate12x / >20%Forward P/E ratio of about 12x, expected annual earnings growth rate exceeding 20%
Impact & implications
The report’s conclusion implies that, for the power equipment and wind power sectors, the market should strip away short-term emotional disturbances and fund rotation noise, focusing instead on the structural demand for underlying grid investments and the implementation of domestic offshore wind policies. For the energy storage sector, geopolitical events triggering energy supply chain concerns could actually become catalysts for accelerating photovoltaic energy storage substitution. Overall, the indiscriminate corrections currently seen in these sectors provide long-term investors with a window of opportunity to build positions at relatively high safety margins.
Risks
- Geopolitical tensions and potential EU trade tariff risks.
- Delayed data center grid connections may affect the timing of demand for some power equipment.
- Recent oil price volatility may trigger short-term stock price fluctuations among distributed energy storage (DG ESS) manufacturers.
What to watch
- Whether Chinese local governments start launching new offshore wind projects in earnest in the second half of 2026.
- The actual trend of Brent crude oil prices after the Strait of Hormuz reopening and its impact on end-user diesel prices.
- The subsequent acquisition of new orders by various companies and the trend of gross profit margins in the wind turbine business.