Recently, the market continued to fluctuate until the Shanghai Composite Index successfully broke through the 3,400-point integer mark on Friday, but the market hotspot changed very quickly.

Some analysts pointed out that the wait-and-see sentiment of market funds is still relatively strong, and they are still waiting for a clearer signal. In this context, in addition to continuing to pay attention to the theme of excellent performance in the annual report period, we can also pay attention to the power equipment sector with continuous high market demand, as well as the 6G sector that was written into the government work report for the first time.

■Reporter Lin Ke

A Power equipment: the market increment space is considerable

Benefiting from the further deepening of the transformation of the power grid, the construction of data centers boosted demand, and the power equipment industry ushered in a continuous rebound in prosperity. In terms of policy, in the previously released "Guiding Opinions on the High-quality Development of Distribution Networks under the New Situation" document, it is proposed that by 2025, the carrying capacity and flexibility of the distribution network will be significantly improved, with about 500 million kilowatts of distributed new energy and about 12 million charging piles access capacity, and the follow-up market increment space is still considerable.

In terms of data, in December 2024, the national power supply project investment will be 302.2 billion yuan, a year-on-year increase of 54%; The cumulative amount completed for the year was 1,168.7 billion yuan, a year-on-year increase of 20.8%. In December 2024, the investment in national power grid projects will be 79.3 billion yuan, a year-on-year decrease of 3%; The cumulative amount completed for the whole year was 608.3 billion yuan, a year-on-year increase of 15.3%.

Wang Weiqi, an analyst at Guosen Securities, pointed out that the domestic network has strong performance certainty and scarcity from 2025 to 2027, and the investment of the State Grid will exceed 650 billion yuan for the first time in 2025, and it will continue to hit a new high from 2023 to 2025. During the "15th Five-Year Plan" period, power grid investment is expected to remain high, with an average annual investment of more than 700 billion yuan. In 2024, the progress of UHV bidding and construction is less than expected, and 2025 is expected to usher in substantial growth. Flexible straightening is a rare new technology direction in UHV, and the penetration rate is expected to continue to increase in the next 2 to 3 years, and the converter valve may usher in a growth of more than 2 times; 2025 is the first year of the development of state-owned sea breeze, and the bidding side is expected to quickly enter the era of flexible and straight, providing additional incremental markets.

According to public information, this year will also start construction of four UHV projects from Shaanxi to Henan and Tibet to the Greater Bay Area, with a total investment of more than 800 billion yuan for the first time. Liu Xingwen, an analyst at Dongguan Securities, said that these power "highways" will send wind and solar energy from the northwest to the east. The acceleration of the investment and construction process of UHV lines across the country is conducive to driving the upstream and downstream industrial chains, ensuring reliable power supply and accelerating the energy transition. It is recommended to pay attention to the leading power transmission and transformation enterprises with leading scale and technology and strong cost control capabilities.

The accelerated construction of data centers has further boosted the prosperity of the power equipment industry. Some industry insiders pointed out that there are many types of power equipment in data centers, long power transmission links, and domestic enterprises have focused on the data center industry for a short time, but they have strong competitive advantages in various subdivisions of products and links, and leading enterprises are gradually establishing the ability to provide solutions. In addition, with the continuous advancement of domestic substitution of computing chips, the data center value chain is expected to shift to Chinese enterprises as a whole. 2025 is expected to be the first year of global AIDC construction, the capital expenditure of major cloud vendors at home and abroad is expected to usher in a large volume, the United States launched the Stargate program, and the annual investment of the four major cloud providers is expected to increase by more than 50% in the next four years. The construction of computing power is highly dependent on electricity, and the leading links such as transformers, switchgears, HVDC/UPS, and PSUs are expected to benefit.

In terms of specific segments, Wang Weiqi suggested that investors should pay attention to four major directions. The first is UHVDC, which focuses on the improvement of the value of converter valves in flexible DC applications; The second is the dual boom of investment orders and delivery on the main network, focusing on the combination of electrical appliances and other links; The third is to go overseas with power equipment, focusing on transformers, smart meters, environmentally friendly gas switches and other links; The fourth is the upgrading and transformation of the distribution network, focusing on the industry leader. It is recommended to pay attention to NARI, Xu Ji Electric, Pinggao Electric, Siyuan Electric, Sifang Shares, Jinbei Electrician, Beijing Cree, Haixing Power, etc.

A selection of potential stocks

The performance of NARI (600406) continued to recover

The company's performance was in line with market expectations, and the performance showed a significant recovery from the previous quarter. In 2024, the world's first static synchronous condenser developed by the company will complete the artificial short-circuit test, independently develop the world's first environmentally friendly 126kV fast circuit breaker, and the independent controllable UHVDC control and protection equipment will be put into operation at the ± 800kV Gusu converter station. Haitong International Securities pointed out that the cumulative amount of the first five UHV equipment tenders in 2024 will reach 17.93 billion yuan, of which in the fifth UHV equipment bidding, the company's converter valve won the bid amount of 2.175 billion yuan, accounting for 50%. The total bidding amount for power transmission and transformation equipment is 10.35 billion yuan, an increase of 10.1% year-on-year compared with the fifth bidding amount in 2023, and the bidding for power equipment in 2024 will still maintain a high degree of prosperity. In addition, international projects have been rapidly promoted, and the company has successfully signed Saudi Arabia's energy storage and static synchronous compensator, Pakistan's Murrah DC stability control system, etc., and won the bid for Saudi Arabia's ADMS system operation and maintenance, etc., and the proportion of overseas revenue reported in 2024 will reach 4.13%, an increase of 1.77% year-on-year.

Xu Ji Electric (000400) benefited from the construction of UHV lines

The company focuses on the four major areas of "source, grid, load and storage", and extends to source, load and storage on the basis of the traditional advantageous business of the power grid, providing "double new" overall solution capabilities. The company's business segments include intelligent substation and distribution systems, DC transmission systems, smart meters, intelligent medium voltage power supply and consumption equipment, new energy and system integration, charging and swapping equipment and other manufacturing services. The company has an excellent historical performance, with a compound growth rate of 15.73% in revenue and 34.08% in net profit attributable to the parent company from 2018 to 2023. Zhongyuan Securities pointed out that as of December 2024, a total of 17 lines with 5 interchanges and 12 straights are waiting to be approved for construction. It is estimated that from 2025 to 2026, it is expected to usher in the approval of 2-3 AC and 6 DC lines per year to support the continuation of the high prosperity of the UHV industry. As a core supplier of UHVDC converter valves and DC control and protection systems, the company is expected to benefit from the construction of UHVDC lines in the long run.

Pinggao Electric (600312) continued to grow at a high rate

The company has now formed a pattern of "one body, two wings and one auxiliary", mainly covering four major sectors: UHV, medium and low voltage, going to sea, and operation and maintenance. The company was transferred to China Electric Equipment Group at the beginning of 2023, and the actual controller is the State-owned Assets Supervision and Administration Commission of the State Council, opening a new chapter in development. As of the first three quarters of 2024, the company achieved operating income of 7.885 billion yuan, a year-on-year increase of 5.88%; The net profit attributable to the parent company was 857 million yuan, a year-on-year increase of 55.13%, and continued to maintain a high growth trend. Northeast Securities pointed out that in the four State Grid UHV equipment bids in 2024, the company won a total of 1.66 billion yuan, accounting for 9.26% of the total UHV equipment bidding. In terms of power transmission and transformation, in 2024, combined electrical appliances will account for the largest proportion of the total bidding of State Grid power transmission and distribution equipment, accounting for 25.45%, in which the company has a high market share, and the winning bid amount accounts for 23.58% of the total bidding of the six batches. As the cornerstone of the company, the high-voltage sector is expected to fully benefit from the construction of UHV, power transmission and transformation, and help the company achieve high performance growth.

Sieyuan Electric (002028) new orders are growing rapidly

According to the company's 2024 performance report, the annual operating income will be 15.458 billion yuan, a year-on-year increase of 24.06%; the net profit attributable to the parent company was 2.087 billion yuan, a year-on-year increase of 33.82%; The net profit deducted from non-attributable to the parent company was 1.914 billion yuan, a year-on-year increase of 34.67%. In terms of sub-markets, the demand in overseas markets is relatively strong, which is basically in line with expectations; It is expected that the business in the network will be relatively stable, and the demand will be relatively more balanced, which will be in line with expectations for the whole year. China Securities pointed out that the company's new contract order target in 2024 is 20.6 billion yuan (excluding tax), a year-on-year increase of 25%, and the company is expected to steadily meet the target and contribute an important increment to overseas markets. The company's revenue growth target for 2024 is 20%, and it has steadily achieved its annual revenue target. In 2025, the investment in the power grid will exceed 650 billion yuan, and the domestic and overseas markets will maintain good demand in the context of the high prosperity of power grid construction at home and abroad. The company's strong α attributes will continue to emerge, and its development will be stable and far-reaching.

Beijing Cree (002350) Electric Power Research Institute is a shareholding company

The company was founded in China Electric Power Research Institute, which is currently the second largest shareholder of the company. The company is one of the earliest enterprises engaged in the promotion of distribution automation technology and equipment development and production in China, and the overall winning rate of medium and low voltage switchgear products, box-type substations, medium voltage power transformers, etc. has remained stable and in the forefront of the industry, and is one of the few companies in the industry that has strong competitiveness in the distribution network primary equipment and secondary equipment related products. In recent years, the company has actively deployed IGBT, optical storage and hydrogen charging technologies, and provided integrated solutions from new energy power generation, energy storage, charging, hydrogen energy application, and comprehensive energy management. In December 2024, the company signed an investment agreement with Hechuan District, Chongqing, to invest 1.83 billion yuan to build an independent energy storage power station project. According to public data, the company has been developing data center projects since 2016 and has now launched all-round cooperation with a number of big data companies.

　　B6G：

The strategic position is clear

The 2025 government work report for the first time included 6G technology in the core framework of future industry cultivation, clarifying its strategic position alongside biomanufacturing and quantum technology.

In the view of industry insiders, the development planning direction of the communications industry, first, 6G technology is imperative, that is, the combination of advanced manufacturing and modern service industry is emphasized; The second is to improve the quality and upgrade of the digital economy, that is, the added value of the core industries of the digital economy will account for about 10% of GDP in 2024, focusing on the large-scale application of 5G, industrial Internet innovation, optimization of computing resources and the construction of international digital industrial clusters; The third is the opening up pilot and international layout, that is, expanding the opening up pilot in the telecommunications field and encouraging foreign investors to expand reinvestment.

Liu Jingzhao, an analyst at Shanghai Securities, pointed out that 6G technology has driven the restructuring of the industrial chain and accelerated the formation of emerging markets. The structure of the 6G industry chain is clear, with the upstream including wired communication and wireless communication, the midstream being network operators and content providers, and the downstream scenarios including Internet of Vehicles, satellite navigation, Internet of Things modules, etc., which are the most beneficial application directions in 6G scenarios. In addition, according to the calculation data of the 6G Technology Promotion Group, the global smart terminal connection scale is expected to exceed 121.6 billion units by 2040, which highlights the subversive support ability of 6G technology for the intelligent connection of all things, and is expected to confirm the cyclical law of "odd intergenerational breakthrough technology, even intergenerational value realization" in the field of mobile communications.

As 5G+ enters the stage of large-scale commercialization, 6G has become the focus of global scientific and technological innovation. Zhao Liangbi, an analyst at China Galaxy Securities, said that in terms of economy, a new round of scientific and technological revolution and industrial transformation is prompting digitalization to become a new engine of economic growth, and 6G technology can greatly improve the efficiency of production methods and international division of labor. On the social front, with the diversification of governance entities and the grid of social service systems, 6G technology will support more scientific and accurate decision-making and dynamic real-time incident response, improve public service experience, and cope with challenges such as population aging. In terms of the environment, 6G technology will help energy-intensive industries achieve green and low-carbon transformation, and enhance the perception and intelligent coordination capabilities of extreme weather and epidemics. In terms of technology, with the integration of artificial intelligence, big data and other technologies, the innovative breakthrough of 6G will bring about an order of magnitude improvement in communication performance.

The iteration of 6G technology drives the three main investment lines, and the path to commercialization is clear. Liu Jingzhao said that the evolution of 6G technology has locked in three core breakthrough directions, space-ground integrated networking, distributed network architecture, endogenous AI native network, and technology iteration directly catalyzing the acceleration of commercialization in the three major fields of satellite communication, Internet of Things, and RISC-V chips. In terms of specific stocks, it is recommended to pay attention to Shanghai Hanxun, Zhenlei Technology, Chengchang Technology, Guobo Electronics, Hager Communication, etc. in the field of satellite communications; The communication module is recommended to pay attention to Quectel, Fibocom, and SUNSEA Intelligence; The RISC-V concept is recommended to focus on VeriSilicon, GigaDevice, Guoxin Technology, Beijing Junzheng, etc.; 6G equipment manufacturers recommend paying attention to ZTE, Tongyu Communication, Xinke Mobile, etc.; Operators recommend paying attention to China Mobile, China Unicom, China Telecom, etc.

A selection of potential stocks

Zhenlei Technology (688270) benefited from the accelerated growth of the industry

The company's products are widely used in phased array radar and various aerospace power supply and distribution systems. With the development of commercial aerospace, the construction of various space infrastructure represented by low-orbit commercial satellites is accelerating, and the overall growth rate of the industry is expected to turn into a rapid growth trend. AVIC Securities pointed out that the company actively lays out and increases R&D investment in the microsystem and module business, which is still mainly shipped to SIP module products, and will gradually convert to three-dimensional heterogeneous microsystems in the future with the emergence of mass production and price advantages. At present, the company has started the research and development of some three-dimensional heterogeneous microsystem mass production products, and has carried out trial promotion. The company focuses on the diverse needs of various customers and promotes the transformation of product forms from full customization to semi-shelf and semi-customization. Although the revenue scale of the microsystem and module business is relatively small, this business is expected to become the second driving force for the rapid growth of the company's revenue scale at the end of the 14th Five-Year Plan and the 15th Five-Year Plan.

The layout of the whole industry chain of Higer Communications (002465).

The company is the earliest unit engaged in the R&D and manufacturing of radio navigation in China, and has always resonated with the national satellite navigation industry at the same frequency, closely followed the development of satellite navigation equipment and chips, and has the R&D and service capabilities of the whole Beidou industry chain. The company has broken through the core technology of Beidou-3, and is the unit with the most Beidou-3 chip models and the most complete categories in the special institutional market, and is the first to realize the whole industrial chain layout of "chips, modules, antennas, terminals, systems, and operations". Debang Securities pointed out that the company is deeply involved in the bidding for a number of in-orbit test projects such as core products and terminals related to the Xinguan Station of the National Satellite Internet Major Project, and the RF and baseband chips have become the official development units, which is expected to complete the layout of the whole industrial chain of the satellite Internet from chips to terminals. The company has increased investment in the aerospace information industry led by satellite Internet and Beidou navigation, invested in the establishment of a subsidiary in Chongqing, and used this as a carrier to establish the company's southwest regional headquarters and actively expand the company's business layout in the southwest region.

Quectel (603236) business has entered a period of rapid expansion

The company is a leading provider of IoT solutions in China, occupying a dominant position in the global IoT module market, with products covering hardware such as cellular modules, on-board front-mounted modules, and smart modules, as well as services and solutions such as IoT solutions, certification and testing, smart city, and industrial intelligence. At present, the company has entered a period of rapid business expansion, and modular products have accelerated their penetration into emerging fields. Shanghai Securities pointed out that the company has eight global technology research and development centers, and actively promotes the implementation of 5G technology in non-terrestrial networks, positioning, virtual reality and other fields, while traditional products are widely used in 5G, LTE, short-range and other multi-dimensional application scenarios. In terms of satellite communication, the rise of the Newspace model, satellite LPWAN catalyzes the transformation of the Internet of Things, and the company's module products have been certified by satellite operators and are being introduced to the market. In terms of on-board electronics, the concept of self-driving mode and V2X has risen, the importance of GNSS modules has increased, and the company has dual-line parallel communication and positioning modules.

VeriSilicon (688521) has leading technology in the subdivision field

The company is a technology leader in video encoding and decoding, and its data center video transcoding platform supports high-density video decoding and encoding, significantly increasing processing power and reducing power consumption and cost. The latest generation of VC9800 series IP features high-performance, multi-stream codec capabilities, support for multiple video formats including AVC, and enhanced support for 8K video conversion. The platform has also added AI processing power, multi-core RISC-VCPU and hardware encryption engine, which has been recognized by many Internet companies and global customers, and the project is progressing smoothly, and some platforms have been adapted and shipped. Everbright Securities pointed out that as of the end of 2024, the company's orders in hand were 2.406 billion yuan, an increase of 13% from the end of the third quarter, and remained high for five consecutive quarters. The company is a scarce domestic IP supplier, with chip design capabilities in the leading position in China, and actively deploys in the field of chiplets. In the context of the rapid increase in the demand for chip localization and edge AI computing power, the company has a broad space for business development.

ZTE Corporation (000063) accelerates the expansion of innovative business

The company continues to consolidate its core competitiveness in wireless and wired products in the field of connectivity. Among them, 5G base stations and 5G core networks have ranked second in the world in cumulative shipments for five consecutive years, and RAN, 5G core networks, optical access and optical transmission products have been rated as industry leaders by mainstream consulting institutions. 5G-A technology has been applied to new business formats such as low-altitude economy and digital cultural tourism, and more than 100 low-altitude synaesthesia pilots have been completed in 25 provinces and cities. In terms of intelligent computing infrastructure and platform technology, large-scale delivery of domestic intelligent computing servers has been realized. In terms of self-developed ASIC chips, the self-developed Dinghai chip supports RDMA standard cards, smart network cards, DPU cards and other forms, providing high-performance and diversified computing power acceleration hardware; We will work with industry partners to promote the open standard for high-speed interconnection of GPUs and create a new interconnected super-node intelligent computing server. Zhongtai Securities pointed out that as a domestic ICT leader, the company actively conforms to the historical trend of the digital economy, accelerates its expansion from the CT field to the IT field, and accelerates the expansion of the second curve innovation business.