Global Power Equipment Sector Upturn, Full Order Books and Rising Premiums
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Global Power Equipment Sector Upturn, Full Order Books and Rising Premiums
Latest financial reports from global power equipment giants show grid and electrification orders exceeding expectations; supply-demand imbalance supports price increases, and institutions are optimistic about the long-term growth of related Asian targets.
- Electrification orders for companies like GE Vernova significantly exceeded expectations, with backlogs covering through 2028-2029.
- Explosive growth in data centers has become a core driver, leading to 2-3 year backlogs for equipment such as transformers.
- Severe supply-demand imbalance supports product price hikes, with significant margin improvements for leading enterprises.
- Global gas turbine orders reached 100GW in 2025, with particularly strong demand in North America.
- U.S. domestic companies are accelerating capacity expansion to alleviate delivery pressures, benefiting Asian suppliers with cost advantages.
Report interpretation
Overview
Based on the latest financial results of major global power equipment companies, this report analyzes the industry's supply-demand landscape and future outlook. The report believes that driven jointly by renewable energy grid integration investments and explosive electricity demand from data centers, the global grid equipment and electrification sectors continue to exhibit severe undersupply. This supply-demand imbalance not only keeps backlog levels at historical highs for leading enterprises but also grants them strong pricing power, driving continuous gross margin improvement. Based on this, J.P. Morgan maintains a positive view on power equipment companies in Asia (such as Hyosung Heavy Industries, Sieyuan Electric, Nari Technology, etc.).
Core views
Regarding orders and visibility, new orders in the grid equipment and electrification segments continue to exceed market expectations. Taking GE Vernova as an example, its total electrification orders in Q4 2025 reached $7.4 billion, far exceeding J.P. Morgan's expectation of $5.5 billion, with a book-to-bill ratio of approximately 2.5x. Currently, the ratio of backlogs to trailing twelve-month revenue for leading enterprises has reached 3-4x, meaning these companies have secured sufficient revenue visibility, expected to cover at least through 2028-2029. Meanwhile, Siemens Energy also pointed out that there is "huge demand" for equipment replacement in the market, which should not be underestimated. In terms of profitability and pricing power, due to constrained supply-side capacity and sustained high demand growth, power equipment companies have demonstrated strong pricing power. Despite pressure from rising metal raw material costs, companies have been able to pass on costs smoothly through price increases. GE Vernova disclosed that the profit margin of its electrification segment backlog increased by 3% year-on-year in 2025, and the overall equipment backlog margin grew cumulatively by 18% compared to 2022 levels. Siemens Energy similarly stated that its Grid Technologies segment achieved "significant margin expansion" in its backlog. Companies like Eaton also adjusted their pricing strategies multiple times during the quarter to protect profit margins. In niche segments, data center demand is the biggest highlight of this cycle. Vertiv's order value reached $8.35 billion, with its backlog doubling to $15 billion; some of Eaton's products also accumulated 2-3 years of order backlog due to data center demand. Additionally, the global gas turbine market experienced an explosion in 2025, with annual new orders reaching approximately 100GW, a significant increase compared to 58GW in 2024 and 44GW in 2023, among which North American orders grew by approximately 160% year-on-year. Regarding capacity expansion, to cope with continuously extending delivery periods, U.S. domestic power equipment companies are accelerating capital expenditure for expansion. For example, Eaton plans to invest $390 million in its Jonesville plant, aiming to double transformer capacity, particularly for 5-10 MVA and data center-related transformers. Schneider Electric, Siemens Energy, and others have also made hundreds of millions of dollars in capacity expansion investments in the U.S. and Mexico. However, analysts point out that capacity release takes time, and the tight supply-demand situation is difficult to alleviate quickly in the short term. Looking ahead, as U.S. load growth expectations are continually revised upward, a major inflection point is expected from 2027 onwards, with utility spending on generation and transmission likely to achieve double-digit growth. This macro trend will bring a multi-year upcycle for various types of power equipment.
Analysis framework
The report adopts a typical "peer benchmarking and cross-validation" (Read-across) analytical framework. First, by reviewing the latest financial data of global leaders in North America, Europe, and other regions, it extracts universal industry signals (such as order growth rates, gross margin changes, management guidance). Second, it maps these macro-level supply-demand data and pricing trends onto Asian targets that are not fully covered or have relatively reasonable valuations, thereby deriving the opportunities facing Asian power equipment companies. Finally, combining specific capacity expansion timelines and commercialization milestones for new technologies (such as 800V DC architecture), it constructs a logic for judging medium-to-long-term industry prosperity.
Methodology notes
Supply-Demand Framework: Judging industry prosperity by comparing market demand growth rate with industry capacity supply growth rate.
When demand growth far exceeds supply growth, "undersupply" occurs, leading to extended product delivery times, price increases, and margin improvements. In this report, the surge in demand driven by data centers contrasts sharply with the supply bottleneck caused by the long manufacturing cycle of transformers, forming the core logic for being bullish on power equipment.
Backlog as a leading indicator of future revenue.
Backlog reflects projects that have been contracted but not yet recognized as revenue. For the heavy-asset, long-cycle power equipment industry, an extremely high backlog/revenue multiple (e.g., 3-4x) means that revenue growth for the next few years is already locked in, greatly reducing performance volatility risk and providing certainty for future free cash flow.
Using the deviation between actual order data and market consensus expectations to evaluate corporate competitiveness.
The report mentions that GE Vernova's actual orders ($7.4B) were significantly higher than market expectations ($5.5B). This positive expectation gap indicates that market demand is stronger than investors anticipated, while also confirming the company's competitive advantage in securing orders.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Hyosung Heavy Industries (298040.KS)Benefit Logic: As a leading Korean power equipment manufacturer, it benefits from increased global grid investment and overseas capacity expansion demand.
- Strengths
- The research report did not elaborate on specific advantages, but listed it as one of the Asian targets under active observation.
- Weaknesses
- The research report did not elaborate on specific disadvantages.
- Comparison
- Korean companies' backlog growth in grid-related orders is slower than some U.S. peers, possibly due to their focus on utility orders.
- Risks
- The research report did not explicitly list specific risks.
- Sieyuan Electric (002028.SZ)Benefit Logic: A Chinese power equipment leader, benefiting from domestic ultra-high voltage construction and overseas grid upgrade demand.
- Strengths
- Mentioned as a representative Asian target, possessing strong market competitiveness.
- Weaknesses
- The research report did not elaborate on specific disadvantages.
- Comparison
- Compared to peer Asian enterprises, it benefits from the cost advantages of Chinese manufacturing.
- Risks
- The research report did not explicitly list specific risks.
- Nari Technology (600406.SS)Benefit Logic: An automation and informatization leader under State Grid, directly benefiting from grid intelligence upgrades and stability investments.
- Strengths
- Possesses core technological barriers in grid technology and automation fields.
- Weaknesses
- The research report did not elaborate on specific disadvantages.
- Comparison
- Enjoys high attention among Asian power equipment enterprises.
- Risks
- The research report did not explicitly list specific risks.
Key data
- GE Vernova Q4 2025 Electrification Orders$7.4 BillionFar exceeding the expected $5.5 billion, with a book-to-bill ratio of approx. 2.5x
- Leading Enterprises' Backlog/TTM Revenue3-4xProvides sufficient revenue visibility through 2028-2029
- GE Vernova Backlog Margin Increase+3% YoYElectrification segment, reflecting improved pricing power
- 2025 Global Gas Turbine Orders~100 GWSignificant increase from 58GW in 2024
- Vertiv Backlog$15 BillionMore than doubled year-on-year
- Eaton Jonesville Plant Investment$390 MillionAims to double transformer capacity
Impact & implications
The report believes that the global power equipment industry is in a long-term upcycle driven by structural factors (new energy grid integration, surging AI data center energy consumption). This supply-demand mismatch is expected to last for several years, allowing leading enterprises with capacity advantages and customer stickiness to enjoy the benefits of volume and price increases. For Asian power equipment companies, although U.S. domestic production is expanding, due to the long construction cycle, they still rely heavily on the global supply chain in the short term, providing Asian enterprises with stable market share and export opportunities.