CICC Electric & New Energy: Power Equipment Sector Rally Quick Comment

English summary

As of noon on July 29, the grid equipment index rose 1.44%, with Hexing Electric hitting limit-up, and Sanxing Electric, Shuangjie Electric, Pinggao Electric, XJ Electric, Dalian Insulator up over 4%, and TBEA, China XD Electric, Mingyang Electric and others rising. Since March this year, the power equipment sector has corrected significantly, with the grid equipment index correcting over 30%. The industry average 2026 P/E is currently ~20x. We reiterate our previous view: solid domestic grid investment provides the base, and overseas demand releases long-cycle elasticity. We continue to recommend focusing on the power equipment sector and head companies with high earnings certainty. # Domestic: UHV bidding ushers in a new peak; distribution and consumption volume and price rise together. # UHV: According to State Grid bidding statistics, as of end-July, UHV bidding amount this year is about RMB 29 billion, already approaching/exceeding the full-year levels of 2024 and 2025. Among them, million-volt GIS completed bidding amount exceeds RMB 5 billion (exceeding all annual values since 2020). There are still 3 planned equipment bidding batches later this year, which we believe may form long-term earnings support for head companies.…