Transformer is the core primary equipment, and the demand at home and abroad is high. The total purchase of power transmission and transformation within the network increased significantly, and the first two batches increased by more than 60% year-on-year; Off-grid market driven by the high increase in new energy installed capacity transformer demand; High overseas demand, 2023H1 transformer export growth rate of more than 25%. The price of core raw materials (electrical steel, copper) went down, gross profit continued to repair, and the overall volume showed a trend of increasing. The growth rate of transformer production is less than the growth rate of demand, the supply is tight, the expansion of production capacity is difficult to release on a large scale in the short term, and the shortage of supply and demand will continue.

Transformer demand is high, and the volume is increasing. On the demand side, the total purchase of power transmission and transformation within the network increased greatly, and the total bid of the first two batches of transformers reached 7.41 billion yuan, a year-on-year increase of 68.4%. The off-grid market is driven by high demand for transformers driven by high installed capacity of new energy such as wind power and photovoltaic. High overseas demand, 2023H1 transformer export growth rate of more than 25%. In terms of gross profit, the price of core raw materials has declined as a whole, the recent copper price shock has slightly increased to 69,000 / ton, the price of electrical steel has declined to 0.53 million/ton, the impact of the epidemic has been eliminated, and the gross profit margin has continued to be repaired. The whole shows the trend of increasing quantity. On the supply side, the capacity utilization rate of transformer enterprises is at a high level, and the overall transformer production growth rate in the country (about 5%) is less than the demand growth rate (more than 20%), and the supply is obviously tight.

In the power transmission market, the industry pattern is relatively stable. For robust considerations, the head company usually uses technological transformation, digital upgrading and other means to improve some production capacity, or extend delivery time. In the power distribution market, enterprises have fierce competition, and actively expand production to seize market share under the rising demand. Most enterprises have already had a layout since 2022H2, and with the increasing tension between supply and demand in 2023H1, the expansion progress has accelerated, and they intend to expand the scale of production expansion. From the perspective of time rhythm, the expansion cycle is 1-1.5 years (optimistic), so the tight state of supply and demand will continue in the short term. From the investment cost point of view, the transformer single expansion investment is about 300-500 million yuan, the investment payback period is 7-8 years, and the internal rate of return of the project is about 15-20%. Therefore, transformer expansion has a higher capital cost.

Focus on new energy demand elasticity is large, the network market accounted for relatively high; But it also faces potential risks. First of all, changes in national infrastructure policies lead to less than expected power investment; Power grid investment scale less than expected; The decline in the growth rate of new energy installations leads to a decline in the demand for power equipment; The growth rate of electricity consumption in the whole society has declined; The bidding progress of the two networks is not as expected; The progress of UHV construction is not as expected. National infrastructure policy changes lead to power investment scale less than expected; Power grid investment scale less than expected; The decline in the growth rate of new energy installations leads to a decline in the demand for power equipment; The growth rate of electricity consumption in the whole society has declined; The bidding progress of the two networks is not as expected; The progress of UHV construction is not as expected. New power market related support is less than expected; The progress of the electricity price mechanism is lower than expected; Power spot market progress is less than expected; Power peak valley price difference is less than expected. The energy crisis has eased fairly quickly and energy prices have fallen fairly quickly. International trade barriers have deepened. Significant changes in the competitive landscape; The intensification of competition leads to lower than expected profitability of each link of power equipment; Transportation and other costs have gone up. The technology cost reduction progress is lower than expected; Technical reliability is difficult to further improve.