1、 Overview of the Power Equipment Industry
Power system mainly includes two categories: power generation equipment and power supply equipment. Power generation equipment mainly includes power plant boilers, steam turbines, gas turbines, water turbines, generators, transformers, etc. Power supply equipment mainly includes transmission lines of various voltage levels, transformers, contactors, etc. There are many power equipment in the power system, and according to their different roles in operation, they are usually divided into electrical primary equipment and electrical secondary equipment. During the use of power equipment, it is affected by wear and corrosion, resulting in a decrease in equipment reliability and the possibility of technical deterioration or even accidents. Power equipment status detection and monitoring products mainly detect and monitor the electrical, mechanical, and other states of power equipment to obtain information on its operation status, quality, and other aspects. This enables timely detection of the development status of various deterioration processes, and timely maintenance and replacement before possible faults or performance degradation affect normal operation, thereby ensuring the safety, stability, and reliability of the entire power grid operation.
The upstream of China's power equipment industry chain includes steel, electronic components, non-ferrous metals, instruments and meters, insulation parts, rubber and plastics, etc; The midstream refers to various power generation and supply equipment; Downstream applications include thermal power generation, wind power generation, photovoltaic power generation, hydropower generation, biomass energy generation, nuclear power generation, and other fields.
The steel listed companies in the upstream of China's power equipment industry chain include Baosteel Group, Hualing Steel, etc., electronic component companies include Lixun Precision, Xiamen Xinda, etc., and non-ferrous metal companies include Jiangxi Copper Industry, China Aluminum Industry, etc. The midstream power equipment enterprises mainly include Ningde Times, Tongwei Co., Ltd., Longji Green Energy, Shanghai Electric, TBEA, Trina Solar, Jingke Energy, TCL Central, Jingao Technology, Dongfang Electric, Xinwangda, Chint Electric, Baosheng Co., Ltd.
2、 Industry background analysis
The construction of smart grids is gradually increasing the distribution network, and the digitalization of the power grid is accelerating. The power equipment testing industry is facing an upgrade in demand and functionality. At present, the main structure of China's smart grid is gradually improving, and the construction of the power grid is accelerating towards the radiation of the distribution network and the digital transformation of the overall power grid; Meanwhile, after the large-scale construction of smart grids, the power grid has a huge amount of existing assets in operation. With the goal of increasing the annual fixed assets investment of the State Grid, the prosperity of the power grid industry continues to rise, and the power equipment status detection and monitoring industry continues to open up growth space. In 2022, major power companies in China completed a total investment of 1247 billion yuan, an increase of 15.6% compared to the previous year. The national power engineering construction completed an investment of 746.4 billion yuan, an increase of 27.2% compared to the previous year. The construction of the national power grid project has completed an investment of 500.6 billion yuan, an increase of 1.8% compared to the previous year. The investment in power sources is accelerating and the investment in the power grid is maintaining a high level. As of January July 2023, major power generation enterprises in China have completed an investment of 401.3 billion yuan in power engineering, a year-on-year increase of 54.4%, and a total investment of 247.3 billion yuan in power grid engineering, a year-on-year increase of 10.4%.
3、 Analysis of the current situation of the power equipment industry
In recent years, the process of intelligence in China has been accelerating, and information technologies such as the Internet of Things and 5G have been continuously developing. Electrical machinery and equipment have also gradually advanced towards intelligence and digitization, providing a good environment for the rapid development of the electrical machinery and equipment manufacturing industry. As of 2022, the operating revenue of China's electrical machinery and equipment manufacturing industry was 10365 billion yuan, a year-on-year increase of 21.48%; It is expected that the operating revenue of China's electrical machinery and equipment manufacturing industry will exceed 120000 billion yuan in 2023. From the perspective of the market share of power generation equipment, the proportion of hydropower equipment will decrease in 2022, while the proportion of thermal power, wind power, and nuclear power equipment will show varying degrees of growth. The data shows that the output of thermal power units is 67.592 million kilowatts, accounting for 49.8%, with a year-on-year increase of 18.5%; The output of wind turbines is 57.038 million kilowatts, accounting for 42.1%, with a year-on-year increase of 1.9%; The output of hydroelectric units was 8.815 million kilowatts, accounting for 6.5%, a year-on-year decrease of 56.3%; The output of nuclear power units is 2.2 million kilowatts, accounting for 1.6%, with a year-on-year increase of 57.1%.
4、 Segmented market analysis
A generator is a mechanical device that converts other forms of energy into electrical energy, and has a wide range of applications in industrial and agricultural production, national defense, technology, and daily life. Fixed assets investment in China's infrastructure construction, construction engineering and other industries continued to slow down, further limiting the development speed of China's power generation units. From 2016 to 2019, the production of power generation units in China showed a downward trend.
Data shows that the output of power generation units in China decreased from 140.663 million kilowatts in 2016 to 90.7369 million kilowatts in 2019. In 2020, the output of power generation units in China did not decrease but increased to 133.8446 million kilowatts. In 2022, the production of power generation units in China reached 183.7610 million kilowatts, a year-on-year increase of 15.02%. As of the first half of 2023, the production of power generation units in China reached 98.311 million kilowatts, a year-on-year increase of 27.97%.
Transformers are devices that use the principle of electromagnetic induction to change the AC voltage, including power transformers operating in the main power grid and distribution transformers operating at the terminals. Transformers are the basic equipment for power transmission and distribution, widely used in industries, agriculture, transportation, urban communities, and other fields. A transformer is a device that uses the principle of electromagnetic induction to change the AC voltage. Its main functions include voltage conversion, current conversion, impedance conversion, isolation, and voltage stabilization.
Affected by the decline in transmission and distribution prices and serious product waste, transformer production slightly decreased in 2018 and began to recover in 2019. In 2020, affected by the COVID-19, the total output of transformers in China will decline slightly to 1.736 billion KVA. With the successive landing of ultra-high voltage projects in various regions of China and effective control of the epidemic, it is expected that the power transformer market in China will continue to grow in the coming years, and the production will reach 1.948 billion kilovolt amperes in 2023.
5、 Comparative analysis of key industry enterprises
From the perspective of industry competition, the institutions currently providing power equipment testing services can be divided into three categories: 1) R&D departments within power equipment manufacturing enterprises: Power equipment manufacturing enterprises usually set up laboratories internally, provide testing services and quality inspection reports when the equipment leaves the factory, and represent enterprises such as Nanrui Jibao Testing Center and Dongfang Electronic Testing Center; 2) Experimental Research Institutes under Power Enterprises: Equipment acceptance and testing services are provided by research institutes and testing and certification centers under power grid and generation enterprises. Representative enterprises include China Electric Power Research Institute, Southern Power Grid Technology, State Grid Electric Power Research Institute, etc; 3) Third party testing institutions: independent of power equipment manufacturers and users, commissioned to provide scientific research results appraisal and testing services, represented by enterprises such as Shanghai Electric Power Science Research Institute and Shanghai Electric Equipment Testing Institute.
In 2022, Dongfang Electric achieved a revenue of 54.179 billion yuan, a year-on-year increase of 15.88%; The net profit attributable to the parent company was 2.855 billion yuan, a year-on-year increase of 24.71%. As of the first quarter of 2023, Dongfang Electric achieved a revenue of 14.717 billion yuan; The net profit attributable to the parent company is 1.019 billion yuan.
The power industry is the most important basic energy industry in the development of the national economy. With the development of the social economy, the dependence of various industries on power energy has significantly increased. In recent years, the country has issued multiple policies to support and guide the development of the power industry. For example, the "14th Five Year Plan for Modern Energy System" proposes to accelerate the green and low-carbon transformation of energy, optimize the operation mode of multi energy complementary scheduling on the power side, and fully tap the potential of power peak shaving; Accelerate the digital and intelligent upgrading of the energy industry, establish an intelligent scheduling system, achieve interaction between source, network, load and storage, multi energy coordination and complementarity, and intelligent regulation of energy demand. Deepen the reform of the power system, accelerate the construction and improvement of an organic connection between the medium and long-term market, spot market, and auxiliary service market in the power market system. As an important component of the power system, power equipment has also received favorable policies and has broad industry prospects.
1、 Overview of the Power Equipment Industry
Power system mainly includes two categories: power generation equipment and power supply equipment. Power generation equipment mainly includes power plant boilers, steam turbines, gas turbines, water turbines, generators, transformers, etc. Power supply equipment mainly includes transmission lines of various voltage levels, transformers, contactors, etc. There are many power equipment in the power system, and according to their different roles in operation, they are usually divided into electrical primary equipment and electrical secondary equipment. During the use of power equipment, it is affected by wear and corrosion, resulting in a decrease in equipment reliability and the possibility of technical deterioration or even accidents. Power equipment status detection and monitoring products mainly detect and monitor the electrical, mechanical, and other states of power equipment to obtain information on its operation status, quality, and other aspects. This enables timely detection of the development status of various deterioration processes, and timely maintenance and replacement before possible faults or performance degradation affect normal operation, thereby ensuring the safety, stability, and reliability of the entire power grid operation.
The upstream of China's power equipment industry chain includes steel, electronic components, non-ferrous metals, instruments and meters, insulation parts, rubber and plastics, etc; The midstream refers to various power generation and supply equipment; Downstream applications include thermal power generation, wind power generation, photovoltaic power generation, hydropower generation, biomass energy generation, nuclear power generation, and other fields.
The steel listed companies in the upstream of China's power equipment industry chain include Baosteel Group, Hualing Steel, etc., electronic component companies include Lixun Precision, Xiamen Xinda, etc., and non-ferrous metal companies include Jiangxi Copper Industry, China Aluminum Industry, etc. The midstream power equipment enterprises mainly include Ningde Times, Tongwei Co., Ltd., Longji Green Energy, Shanghai Electric, TBEA, Trina Solar, Jingke Energy, TCL Central, Jingao Technology, Dongfang Electric, Xinwangda, Chint Electric, Baosheng Co., Ltd.
2、 Industry background analysis
The construction of smart grids is gradually increasing the distribution network, and the digitalization of the power grid is accelerating. The power equipment testing industry is facing an upgrade in demand and functionality. At present, the main structure of China's smart grid is gradually improving, and the construction of the power grid is accelerating towards the radiation of the distribution network and the digital transformation of the overall power grid; Meanwhile, after the large-scale construction of smart grids, the power grid has a huge amount of existing assets in operation. With the goal of increasing the annual fixed assets investment of the State Grid, the prosperity of the power grid industry continues to rise, and the power equipment status detection and monitoring industry continues to open up growth space. In 2022, major power companies in China completed a total investment of 1247 billion yuan, an increase of 15.6% compared to the previous year. The national power engineering construction completed an investment of 746.4 billion yuan, an increase of 27.2% compared to the previous year. The construction of the national power grid project has completed an investment of 500.6 billion yuan, an increase of 1.8% compared to the previous year. The investment in power sources is accelerating and the investment in the power grid is maintaining a high level. As of January July 2023, major power generation enterprises in China have completed an investment of 401.3 billion yuan in power engineering, a year-on-year increase of 54.4%, and a total investment of 247.3 billion yuan in power grid engineering, a year-on-year increase of 10.4%.
3、 Analysis of the current situation of the power equipment industry
In recent years, the process of intelligence in China has been accelerating, and information technologies such as the Internet of Things and 5G have been continuously developing. Electrical machinery and equipment have also gradually advanced towards intelligence and digitization, providing a good environment for the rapid development of the electrical machinery and equipment manufacturing industry. As of 2022, the operating revenue of China's electrical machinery and equipment manufacturing industry was 10365 billion yuan, a year-on-year increase of 21.48%; It is expected that the operating revenue of China's electrical machinery and equipment manufacturing industry will exceed 120000 billion yuan in 2023. From the perspective of the market share of power generation equipment, the proportion of hydropower equipment will decrease in 2022, while the proportion of thermal power, wind power, and nuclear power equipment will show varying degrees of growth. The data shows that the output of thermal power units is 67.592 million kilowatts, accounting for 49.8%, with a year-on-year increase of 18.5%; The output of wind turbines is 57.038 million kilowatts, accounting for 42.1%, with a year-on-year increase of 1.9%; The output of hydroelectric units was 8.815 million kilowatts, accounting for 6.5%, a year-on-year decrease of 56.3%; The output of nuclear power units is 2.2 million kilowatts, accounting for 1.6%, with a year-on-year increase of 57.1%.
4、 Segmented market analysis
A generator is a mechanical device that converts other forms of energy into electrical energy, and has a wide range of applications in industrial and agricultural production, national defense, technology, and daily life. Fixed assets investment in China's infrastructure construction, construction engineering and other industries continued to slow down, further limiting the development speed of China's power generation units. From 2016 to 2019, the production of power generation units in China showed a downward trend.
Data shows that the output of power generation units in China decreased from 140.663 million kilowatts in 2016 to 90.7369 million kilowatts in 2019. In 2020, the output of power generation units in China did not decrease but increased to 133.8446 million kilowatts. In 2022, the production of power generation units in China reached 183.7610 million kilowatts, a year-on-year increase of 15.02%. As of the first half of 2023, the production of power generation units in China reached 98.311 million kilowatts, a year-on-year increase of 27.97%.
Transformers are devices that use the principle of electromagnetic induction to change the AC voltage, including power transformers operating in the main power grid and distribution transformers operating at the terminals. Transformers are the basic equipment for power transmission and distribution, widely used in industries, agriculture, transportation, urban communities, and other fields. A transformer is a device that uses the principle of electromagnetic induction to change the AC voltage. Its main functions include voltage conversion, current conversion, impedance conversion, isolation, and voltage stabilization.
Affected by the decline in transmission and distribution prices and serious product waste, transformer production slightly decreased in 2018 and began to recover in 2019. In 2020, affected by the COVID-19, the total output of transformers in China will decline slightly to 1.736 billion KVA. With the successive landing of ultra-high voltage projects in various regions of China and effective control of the epidemic, it is expected that the power transformer market in China will continue to grow in the coming years, and the production will reach 1.948 billion kilovolt amperes in 2023.
5、 Comparative analysis of key industry enterprises
From the perspective of industry competition, the institutions currently providing power equipment testing services can be divided into three categories: 1) R&D departments within power equipment manufacturing enterprises: Power equipment manufacturing enterprises usually set up laboratories internally, provide testing services and quality inspection reports when the equipment leaves the factory, and represent enterprises such as Nanrui Jibao Testing Center and Dongfang Electronic Testing Center; 2) Experimental Research Institutes under Power Enterprises: Equipment acceptance and testing services are provided by research institutes and testing and certification centers under power grid and generation enterprises. Representative enterprises include China Electric Power Research Institute, Southern Power Grid Technology, State Grid Electric Power Research Institute, etc; 3) Third party testing institutions: independent of power equipment manufacturers and users, commissioned to provide scientific research results appraisal and testing services, represented by enterprises such as Shanghai Electric Power Science Research Institute and Shanghai Electric Equipment Testing Institute.
In 2022, Dongfang Electric achieved a revenue of 54.179 billion yuan, a year-on-year increase of 15.88%; The net profit attributable to the parent company was 2.855 billion yuan, a year-on-year increase of 24.71%. As of the first quarter of 2023, Dongfang Electric achieved a revenue of 14.717 billion yuan; The net profit attributable to the parent company is 1.019 billion yuan.
The power industry is the most important basic energy industry in the development of the national economy. With the development of the social economy, the dependence of various industries on power energy has significantly increased. In recent years, the country has issued multiple policies to support and guide the development of the power industry. For example, the "14th Five Year Plan for Modern Energy System" proposes to accelerate the green and low-carbon transformation of energy, optimize the operation mode of multi energy complementary scheduling on the power side, and fully tap the potential of power peak shaving; Accelerate the digital and intelligent upgrading of the energy industry, establish an intelligent scheduling system, achieve interaction between source, network, load and storage, multi energy coordination and complementarity, and intelligent regulation of energy demand. Deepen the reform of the power system, accelerate the construction and improvement of an organic connection between the medium and long-term market, spot market, and auxiliary service market in the power market system. As an important component of the power system, power equipment has also received favorable policies and has broad industry prospects.
