Speculating on coal in winter and electricity in summer has been a tradition in the capital market over the years.
For modern society, electricity is like air, and you don't usually feel its existence, but once you are in short supply, you will know how uncomfortable it is to work and live.
At the beginning of this year, when the AI-generated video model Sora was born, Musk continued to call the world's attention to the problem of future power shortages.
Coincidentally, Altman, the founder of openAI, Bill Gates, the founder of Microsoft, and Bezos, the founder of Amazon, have also invested in nuclear power projects in recent years.
As the mother of industry, transformers are naturally the top priority and key role in the huge investment in power grid equipment.
So, what are the important roles of transformers in the power grid?
From the perspective of the composition of the power system, it is generally composed of five major links: power generation, transformation, transmission, distribution and consumption, but each link has a completely different voltage, and the related links must be transformed through transformers to achieve the seamless connection of the entire power system.
For example, in our country's power system, the power generated by major power plants must first increase the voltage to 110kV-1000kV before it can be transmitted over long distances through high-voltage transmission lines.
When the high-voltage power is transmitted to the power consumption area, it must be stepped down to 110kV-10kV before it can enter the local distribution grid, and then downgraded to 380V or 220V to enter the factory and residential users' homes.
Therefore, the power system is inseparable from the connection between the transformers in the major links.
So, where is the incremental space in the transformer market?
First of all, the continuous increase in domestic and foreign electricity demand has promoted the expansion of power grid investment.
The development of modern economy is inseparable from the demand for electric energy, that is, the rapid development of artificial intelligence technology in the past two years, in addition to the need for high-performance computing chips, is also a very powerful power consumer.
Since 2022, the world's major data centers, cryptocurrency "mining" and artificial intelligence (AI) have consumed about 46 billion kilowatt-hours of electricity, accounting for almost 2% of the world's total electricity demand.
In particular, data centers, as key facilities supporting the development of artificial intelligence technology, are the main force of power consumption in the new economic situation in the future, and there will be explosive growth in power demand in the future, which is promoting the increase of power grid investment.
Secondly, the power equipment of developed countries in Europe and the United States is aging and urgently needs to be upgraded.
As a developed country in the world, the industrialization of European and American countries began very early, and many of the power grids that were built at the beginning were quite old.
For example, in the United States and Japan, many power grid lines were built 20 years ago, or even earlier. In the European Union, more than 50% of power grids have been in construction for more than 20 years.
In the United States, most of the power grid equipment was built in the sixties and seventies of the last century, if according to the plan in 50, 60, 70, 80 years, every ten years to replace 1/4 of the old power grid equipment, then before 2050 there will be an annual investment of 10 billion US dollars.
Therefore, although the economic growth of these developed countries is slowing down, and the total length of the domestic power grid is not growing much, there is a strong demand for grid investment to update old equipment.
Third, the supply of local transformers in Europe and the United States is insufficient, and the scale of domestic transformer exports continues to grow.
It can be said that developed countries such as Europe and the United States have a very large demand for power equipment such as transformers, but developed countries have insufficient production capacity after deindustrialization, and are extremely dependent on domestic imports.
In the U.S., for example, the lead time has increased from 30-60 weeks to more than 100 weeks in 2023 due to the new demand for transformers from power utilities, and the growing demand has led to longer lead times.
Along with longer lead times, prices have also risen significantly. In 2023, the price of distribution transformers in the United States will increase by 68% compared to 2020, and the price of other types of transformers will also increase by about 60%.
Under the strong market demand in the European and American markets, in the first quarter of 2024, the total domestic transformer exports reached 9.33 billion yuan, a year-on-year increase of 30.1%.
Especially in March, the export value reached 3.44 billion yuan, which continued to increase by 37.5% on the basis of February, and the upward trend was obvious.
Judging from the overall performance from 2015 to 2024, the total proportion of domestic transformers exported to Europe and the United States is increasing, and the trend is obvious.
In the case of increasing investment in power grids in major countries around the world, domestic power equipment manufacturers have become the most beneficiary group in the world, and overseas performance is expected to grow rapidly.
So, what are the excellent companies for transformers?
From the upstream of the transformer, it is mainly used to manufacture various raw materials required for transformers, especially silicon steel, copper, aluminum and other metal materials.
Copper and aluminum in these raw materials are commodities, and the proportion of industry consumption is not high compared with the entire metal market, and the price follows the market, and the transformer industry has little impact on them.
Generally speaking, the cost of oriented silicon steel accounts for about 30%-40% of the production cost of a transformer, which is the most critical raw material.
At present, the global production capacity of silicon steel is mainly in China, and the production capacity of Baosteel, Wangbian Electric, TISCO Stainless and other companies is among the best.
However, the price of the previous oriented silicon steel has fallen for a year, and the performance of Wangbian Electric, which has a high proportion of business, has also been dragged down, and the performance of the simple transformer company is not as outstanding.
Sanbian Technology, the company is a junior in the domestic transformer industry, and its market share and market value are not as good as those of Jinpan Technology, TBEA, Wangbian Electric and other industry predecessors.
However, the company has continuously entered the top ten in the comprehensive economic benefits of the national transformer industry, and is also an excellent supplier of the State Grid and China Southern Power Grid, and has become a strategic supplier of Wanhua Chemical, Sungrow and TBEA, and its strength is also quite good.
In the past three years, the company's performance has grown rapidly, with a compound annual growth rate of 19.45% in revenue and a compound annual growth rate of 41.24% in net profit.
In the first quarter of 2024, the company's revenue was 324 million yuan, a year-on-year increase of 37.06%; The attributable net profit was 26 million yuan, a year-on-year increase of 282.95%. The growth rate is very encouraging.
In terms of export business, the company realizes the general contract export by providing transformers to Sungrow, and the gross profit can reach 38%, which is significantly better than the domestic business.
On the whole, after the continuous development in recent decades, especially the rapid development of the new energy industry in recent years, the domestic power industry has a leading position in the global market, and the industry will continue to benefit from the growing investment in the global power market.
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Source: Flying Whale Investment Research