Key takeaway

The company released the 2025 annual report and the 1Q26 report. In 2025, the company’s net profit attributable to shareholders grew steadily by 8.79%; in 1Q26, earnings increased 6.04% YoY, maintaining a steady upward trend. State Grid expects fixed asset investment to reach RMB4tn during the 15th Five-Year Plan period, up 40% compared with the 14th Five-Year Plan period. Investment within the grid maintains strong momentum, providing stable demand growth. The company’s core grid-related business remains solid, with ultra-high-voltage and other products maintaining high market share and continuing to secure large orders. Non-grid business has achieved rapid breakthroughs, with new energy-related operations contributing key incremental growth, and overseas expansion progressing steadily. Newly signed contracts reached RMB75.868bn in 2025, up 14.40% YoY. Abundant orders on hand provide solid support for future earnings growth. As the industry leader in smart grids, the company is expected to continue its steady upward trajectory amid a highly prosperous industry cycle.

Event

The company released the 2025 annual report and the 1Q26 report.

In 2025, operating revenue reached RMB66.229bn, up 14.53% YoY, and net profit attributable to shareholders of the parent company reached RMB8.279bn, up 8.79% YoY; net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB7.983bn, up 8.04% YoY. In 1Q26, operating revenue reached RMB9.564bn, up 7.52% YoY, and net profit attributable to shareholders of the parent company reached RMB0.721bn, up 6.04% YoY; net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB0.642bn, up 5.39% YoY.

Quick Take

Results in line with expectations, steady upward trend in 1Q26

1) In 2025, operating revenue reached RMB66.23bn for the full year, steadily delivering on operating targets. Net profit attributable to shareholders of the parent company / net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB8.28bn / RMB7.98bn, up 8.8% / 8.0% YoY. Benefiting from the high prosperity of the power equipment industry at home and abroad, the company, as an industry leader, achieved steady earnings growth.

2) In 4Q25, net profit attributable to shareholders of the parent company / net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB3.424bn / RMB3.344bn, up 9.30% / 9.48% YoY.

3) In 1Q26, revenue reached RMB9.564bn, up 7.5% YoY; net profit attributable to shareholders of the parent company / net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB0.721bn / RMB0.642bn, up 6.0% / 5.4% YoY respectively, with results maintaining a steady upward trend in 1Q26.

Domestic fundamentals remain stable with improvement, and non-grid business grows rapidly

1) Smart grid business: The core business stabilized. Revenue reached RMB33.42bn in 2025, up 15.7% YoY; gross margin was 30.1%, up 0.8pct YoY. The increase was mainly due to stronger market expansion of grid products and growth in revenue scale.

2) Digital-energy integration: Overall revenue scale remained stable. Revenue reached RMB12.30bn in 2025, down slightly by 0.5% YoY; overall revenue scale remained stable.

3) Low-carbon energy: Maintained rapid growth. Revenue reached RMB16.73bn in 2025, up 37.3% YoY. The growth was mainly driven by strong expansion in energy storage and wind power businesses.

4) Industrial internet business recorded revenue of RMB3.01bn in 2025, up 5.1% YoY. Integration and other businesses recorded revenue of RMB0.69bn in 2025, down 52.2% YoY. The decline was mainly due to the slowdown in overall energy-saving leasing business.

2026 operating targets relatively stable: Ample orders support future performance

1) The company had ample orders on hand in 2025, reaching RMB52.03bn, including RMB33.19bn of newly signed orders on hand during the year. Newly signed contracts for the full year reached RMB75.87bn, up 14.40% YoY.

2) The 2026 target plan includes revenue of RMB75bn, up 13.24% YoY, operating cost of RMB56.03bn, period expenses of RMB8.59bn, and fixed asset investment of RMB1.82bn. Overall operating targets are relatively stable.

Industry remains highly prosperous, with grid-related, non-grid, and overseas businesses advancing in synergy

1) The industry remains in a boom cycle. Grid investment is expected to maintain strong momentum during the 15th Five-Year Plan period. Completed grid investment reached RMB76.6bn from January to March 2026, up 14.7% YoY. State Grid expects fixed asset investment to reach RMB4tn during the 15th Five-Year Plan period, up 40% compared with the 14th Five-Year Plan period. Investment within the grid maintains strong momentum, providing stable demand growth.

2)The grid “core base” continues to consolidate. The company implemented key projects including the Mengxi–Beijing–Tianjin–Hebei UHV project, Sichuan distribution network automation, and Anhui’s nextgeneration electricity consumption data acquisition system, while also winning bids for major projects such as China Southern Power Grid’s informatization framework procurement, Guizhou dispatching, and Guangxi pumped storage, further strengthening its core market position.

3)The value-added segment outside the grid has become an important growth engine. The company won bids for projects including Huaneng Xinjiang synchronous condenser, CGN Ruoqiang and Luopu energy storage in Xinjiang, Yangjiang Sanshan Island offshore wind power, and the phase II water measurement project of the Yangtze-to-Huaihe water diversion project. It also supported the successful commissioning of the world’s largest single green ammonia project in Da’an, Jilin.

4)International business: Strong momentum in a high-potential segment. By combining partnerenabled overseas expansion with independent market development, the company entered five new markets including Tanzania and Madagascar. Its dispatching and distribution network solutions achieved multiple first-of-its-kind breakthroughs or scaled applications. More than 50 products received international certifications from TüV SüD, TüV Rheinland and others, pos itioning overseas markets as a new growth driver.

Earnings forecast

Net profit attributable to shareholders of the parent company is expected to reach RMB9.25bn/RMB10.34bn in 2026/2027, with PE of 20.2/18.1x.

Risks:

1) Demand: Changes in national infrastructure policies lead to a smaller-than-expected investment size in power generation; size of investment in power grid is smaller than expected; lower growth rate of new energy installed capacity leads to a decline in demand for power equipment; the growth rate of overall electricity consumption declines; tender progress of China Southern Power Grid (CSG) and National Grid (NG) fails to meet expectations; construction progress of UHV is slower than expected, etc.

2) Supply: The prices of commodities such as copper and steel increase; the supply of power electronic devices becomes tight, and the progress of localization misses expectations.

3) Policies: Supportive policies for new energy fall short of expectations; promotion of new electricity pricing mechanism misses expectations; the power spot market development is slower than expected; the peak-valley price differences in electricity do not meet expectations.

4) International situation: The energy crisis is alleviated rapidly and energy prices fall rapidly; international trade barriers become higher, etc.

5) Markets: The competitive landscape sees significant changes; intensified competition leads to lowerthan- expected profitability in the entire power equipment industry; and costs such as transportation increases.

6) Technology: The progress of technology cost reduction is lower than expected; technical reliability is difficult to see further improvement.