Deep Analysis of China UHV Industry Landscape: From A-Share Core Targets to Supply Chain (2024-2027)

Part 1: Macro Drivers - UHV: From “National Business Card” to “Energy Superhighway”

1.1 Strategic Definition: Why UHV is the Only Solution for “Renewable Energy Consumption”?

Ultra-High Voltage (UHV) transmission technology specifically refers to transmission levels of AC 1000kV, DC ±800kV and above¹, with its core function enabling cross-regional, long-distance, low-loss power transmission². The status of this technology in China’s energy strategy is undergoing a fundamental transformation, with its driving force shifting from early “technology showcase” and “national business card” to addressing the “rigid demand” of renewable energy consumption challenges.

China’s energy endowment shows a distinct reverse distribution pattern: over 80% of energy resources (especially wind, solar, and hydro) are concentrated in the western and northern regions, while over 70% of electricity consumption markets are located in the eastern and central regions². With China’s “dual carbon” goals advancing, large-scale wind and solar power bases (especially in “sandy-gobi-desert” areas) are being built at unprecedented speeds¹.

However, if these renewable energy sources cannot be effectively transmitted, severe “wind and solar curtailment” problems will result. The Politburo meeting of the CPC Central Committee has clearly demanded “strengthening the planning and construction of renewable energy supply and consumption systems”³. Against this backdrop, analysis from institutions like Tianfeng Securities points out that China primarily adopts a UHV-based transmission strategy for renewable energy consumption³. Analysis shows that existing energy storage capacity is far from sufficient to provide strong support for local renewable energy consumption³.

Therefore, UHV has become the “energy superhighway” connecting western clean energy bases with eastern load centers. It is no longer an “icing on the cake” option but the “only solution” and “mandatory choice” for ensuring national energy security and achieving clean energy transition. Its construction urgency and certainty have reached historic highs¹.

1.2 Investment Super Cycle: “14th Five-Year Plan” Foundation, “15th Five-Year Plan” Acceleration

The urgency of UHV construction is directly reflected in the investment plans of State Grid and China Southern Power Grid. A “super investment cycle” far exceeding market expectations has been launched.

According to State Grid’s “14th Five-Year Plan” (2021-2025), the original plan was to build UHV projects of “24 AC lines and 14 DC lines,” involving over 30,000 kilometers of lines with a total investment of 380 billion RMB¹. Another plan proposed building 7 UHV DC lines during the “14th Five-Year Plan” period, adding 56 million kW of transmission capacity⁴.

However, recent investment announcements show that actual investment scale and construction speed have been massively “accelerated and advanced”:

1. 2024 Investment: State Grid announced that in 2024, it will increase the construction of digital and smart strong grids, with total grid construction investment expected to exceed 500 billion RMB¹.
2. 2025 Investment Peak: State Grid further announced that total grid investment in 2025 is expected to exceed 650 billion RMB for the first time, setting a historical record⁵.

The combined investment for just 2024 and 2025 (exceeding 1.15 trillion RMB) is already several times the original 380 billion RMB UHV special investment planned for the entire “14th Five-Year Plan” period. This data strongly indicates that many projects originally planned for the “15th Five-Year Plan” period have been advanced to concentrate launches in 2024-2025.

Meanwhile, China Southern Power Grid also plans to invest 195.3 billion RMB from 2024 to 2027 for large-scale updates of grid equipment, and separately invest over 100 billion RMB for digital and intelligent upgrades of rural power grids⁶.

For secondary market investors, this means that the order confirmation and performance explosion period for UHV supply chain-related companies (especially midstream core equipment manufacturers) is not a distant future but a deterministic event happening now (2024-2025).

1.3 Key Project Pipeline: Visualization of Demand

Huge investments will ultimately materialize into specific transmission lines. As of the end of 2024, China has cumulatively built and put into operation 42 UHV AC/DC projects (38 by State Grid, 4 by China Southern Power Grid), with cross-provincial and cross-regional transmission capacity exceeding 300 million kW⁷.

Currently under construction are key projects including the “Jinsha River Upper Reaches to Hubei” (i.e., “Jinshang to Hubei”) ±800kV UHV DC transmission project⁷, and China’s first “Ningxia-Hunan” ±800kV UHV DC project primarily for transmitting “sandy-gobi-desert” wind and solar base renewable energy².

More critically, the National Energy Administration has clearly identified a batch of new key power mutual assistance projects to be approved for construction in 2025, which will constitute the main demand sources for 2025-2027⁷:

• West Inner Mongolia to Beijing-Tianjin-Hebei
• Southeast Tibet to Guangdong-Hong Kong-Macao Greater Bay Area
• Gansu Badain Jaran Desert Base Power Transmission to Sichuan
• Southern Xinjiang Power Transmission to Chongqing-Sichuan

The following table (Table 1) summarizes key UHV projects in the late “14th Five-Year Plan” and early “15th Five-Year Plan” periods, clearly demonstrating the certainty and scale of demand in the coming years.

Table 1: 2024-2027 Key UHV Project Planning and Investment Overview

Data Source: Compiled based on¹

Part 2: UHV Supply Chain Landscape Analysis

2.1 Supply Chain Framework: Upstream (Support), Midstream (Core), Downstream (Application)

Drawing on the general supply chain framework⁸, the complex power equipment industry chain of UHV can be clearly divided into three main segments: upstream, midstream, and downstream.

• Upstream: Raw Materials and Basic Components
  • Segments: Including steel (for towers), insulation materials, power cables, power semiconductors (like IGBTs) required for power equipment.
  • Characteristics: Relatively full competition, high product homogeneity. Although UHV construction expansion brings significant “volume” increases, profit margins are relatively low due to fragmented competition patterns.
• Midstream: High Technical Barrier Core Equipment Manufacturing
  • Segments: The value core of UHV projects. Including converter valves, converter transformers, GIS (gas-insulated switches), control and protection systems with extremely high technical barriers.
  • Characteristics: Extremely high technical barriers, highly concentrated market, oligopolistic structure. This is the segment with the highest value proportion and profit margins in UHV investment, and also the focus of this report’s analysis.
• Downstream: Engineering Construction and Grid Operation & Maintenance
  • Segments: Including EPC general contracting for UHV lines and substations, construction, and post-construction grid automation dispatching and intelligent operation & maintenance.
  • Characteristics: Project-oriented, highly dependent on grid company tenders, and grid automation software system integration capabilities.

2.2 Upstream: Basic Materials and Components (A-Share Company List)

A-share listed companies in the upstream segment mainly benefit from the expansion of construction scale.

• Transmission Towers:
  • Huijin Tong (603577.SH)³: One of the professional suppliers of UHV towers.
• Insulators:
  • Shenma Power (603530.SH)³: Leading company in the composite insulator field.
• Power Cables:
  • Hengtong Optic-Electric (600487.SH)⁹: Provides UHV conductors and optical fiber composite ground wires (OPGW).
  • Far East Co., Ltd. (600869.SH)⁹: One of the leading enterprises in the wire and cable industry.
• Power Electronic Components (IGBTs):
  • Star Semiconductor (603290.SH)¹⁰: Domestic IGBT leader, playing a key role in UHV flexible DC transmission (such as in fields participated by Sayrui Technology (580.HK)¹⁰), achieving import substitution.

Analysis points out that for upstream segments like cables and towers, due to relatively fragmented competition, their performance elasticity in 2020 UHV orders was only 2% to 11%¹¹. This confirms that although upstream benefits, their bargaining power and profit margins are limited by competition patterns, making them not the core segment for UHV theme investment.

2.3 Midstream: Core Equipment Manufacturing (A-Share Company List)

Midstream core equipment is the “heart” and “brain” of UHV, with both the highest technical barriers and value. The market is highly concentrated among a few A-share leading companies¹².

• Transformers/Converter Transformers (AC/DC conversion key equipment):
  • TBEA (600089.SH)¹²
  • China XD Electric (601179.SH)¹¹
• GIS (Gas Insulated Switches) (AC UHV core switches):
  • Pinggao Electric (600312.SH)¹²
  • China XD Electric (601179.SH)¹¹
• Converter Valves (DC UHV “heart”, highest technical barrier):
  • XJ Electric (000400.SZ)³
  • NARI Technology (600406.SH)³
• Control and Protection Systems (UHV “brain”):
  • NARI Technology (600406.SH)³
  • XJ Electric (000400.SZ)³
• Secondary Equipment/Automation:
  • Sifang Automation (601126.SH)³

2.4 Downstream: Engineering Construction and Intelligent O&M (A-Share Company List)

The downstream segment is mainly dominated by large central enterprises and grid automation companies.

• Grid Automation/Dispatching:
  • Jicheng Electronics (002339.SZ)³: Participates in grid automation systems.
  • Guodian Nanzi (600268.SH)³: One of the leaders in power automation, having won multiple 1000kV UHV AC projects³.
• Intelligent O&M:
  • XJ Electric (000400.SZ)¹³: Besides core equipment, the company has clearly laid out emerging businesses like “intelligent O&M”.
• EPC General Contracting:
  • China Energy Engineering (601868.SH)²
  • PowerChina (601669.SH)
  • Note: These two A-share listed companies are the actual builders of UHV projects and the largest participants in the downstream segment.

2.5 UHV A-Share Industry Chain Landscape Map

The following table (Table 2) intuitively summarizes the key segments of the UHV industry chain across upstream, midstream, and downstream, along with their corresponding core A-share listed companies.

Table 2: UHV A-Share Industry Chain Landscape Map (by Upstream, Midstream, Downstream)

Data Source: Compiled based on²

Part 3: Midstream Oligopoly Deep Analysis: Locking in “High Barrier, High Concentration” Core Leaders

The midstream core equipment segment of UHV is the most technically demanding and profitable part of the entire industry chain. Analyzing the competitive landscape of this segment is key to grasping this investment cycle.

3.1 Core Structure: From “Multi-Party Competition” to “National Team Integration”

A fundamental market transformation that must be recognized is that the competitive landscape of the UHV midstream market has been reshaped at the national level. Historically, companies like XJ Electric, Pinggao Electric, and China XD Electric belonged to different groups and had some degree of competition.

However, the latest information clearly shows that XJ Electric (000400.SZ) is already “a listed company controlled by China Electrical Equipment Group Co., Ltd. (CEEG)”¹³. Further analysis indicates that Pinggao Electric and China XD Electric have also been integrated under this “super giant” CEEG¹⁴.

This means the competition in the UHV midstream market has fundamentally changed. It is no longer the past multi-party melee but has been simplified to a “three-kingdom battle” among three major camps:

1. “CEEG System” (China Electrical Equipment Group): Integrating XJ Electric, Pinggao Electric, China XD Electric, becoming the absolute main force in UHV hardware equipment.
2. “NARI System” (State Grid Direct): Centered on NARI Technology, it’s the “direct son” of State Grid with natural advantages in control systems and automation.
3. “Independent System” (Market-oriented Leader): Represented by TBEA, maintaining independent leader status through its deep technical accumulation and market share in the transformer field.

This “national-level integration” has ended internal vicious competition in the core equipment field, creating extremely high industry entry barriers. These leading companies, as “national team” members, will steadily divide State Grid’s over 650 billion RMB investment cake in 2025¹⁵, with their profitability and order certainty receiving unprecedented guarantees.

3.2 Leader Analysis (I): NARI Technology (600406.SH) - Grid “Brain” and “All-Around Champion”

• Positioning: Absolute leader in grid automation and DC control protection systems¹².
• Core Products: UHV DC transmission “brain” - control protection systems; also one of the dual oligarchs in converter valves¹¹.
• Competitive Advantages: Historical data shows its performance elasticity between 10%-30%¹¹. As a State Grid direct subsidiary, it has incomparable advantages in grid automation, dispatching, and secondary equipment. NARI Technology’s growth is dual-driven: it not only benefits from new UHV line orders but also continuously benefits from the “digital and smart strong grid” upgrade and transformation of existing grids¹. This makes its growth certainty the highest among all targets.

3.3 Leader Analysis (II): XJ Electric (000400.SZ) - Absolute Dominator of DC “Heart”

• Positioning: Leading enterprise in UHV DC transmission (UHV DC) core equipment¹³.
• Core Products: DC transmission “heart” - converter valves¹³. This is one of the most technically demanding and valuable components in DC transmission.
• Competitive Advantages: The company has “obvious” advantages in the UHV DC field¹³, capable of providing “UHV DC transmission equipment complete sets and overall solutions”¹³. Especially in the more technically demanding “flexible DC transmission” field, its flexible DC converter valves product share is at an “industry-leading level”¹³. As the DC leader under CEEG Group¹³, its order certainty is extremely high when multiple DC projects like “Jinshang to Hubei” enter peak construction periods.

3.4 Leader Analysis (III): TBEA (600089.SH) - Global Transformer Giant

• Positioning: Core supplier of UHV AC/DC transformers and reactors¹².
• Core Products: Self-developed ±1100kV converter transformers, 700MVA-500kV transformers and other ultra-high voltage transmission and distribution equipment¹⁶.
• Competitive Advantages: Historical performance elasticity of 10%-30%¹¹. Transformers (especially converter transformers) account for extremely high value in UHV projects (about 20%-30% of total equipment investment). TBEA is a global transmission and distribution giant with deep technical accumulation, jointly dominating the domestic high-end transformer market with China XD Electric¹⁷.

3.5 Leader Analysis (IV) & (V): Pinggao Electric (600312.SH) and China XD Electric (601179.SH)

• Positioning: Core equipment leaders in AC UHV (UHV AC), the highest performance elasticity targets¹¹.
• Core Products:
  • Pinggao Electric: Absolute main force in GIS (gas-insulated switches), leading market share¹¹.
  • China XD Electric: Dual leader in GIS and transformers, one of the most comprehensive hardware manufacturers in business lines¹⁴.
• Competitive Advantages:
  An extremely critical data point is: in 2020 UHV orders, Pinggao Electric and China XD Electric’s performance elasticity exceeded 50%, far higher than NARI and TBEA’s 10%-30%¹¹.
  • The source of this high elasticity lies in their business “purity”. NARI Technology (600406)‘s revenue contains large amounts of grid automation and software business, while TBEA (600089)‘s revenue contains massive new energy (polysilicon) business, making the marginal contribution of UHV orders to their total income relatively diluted.
  • In contrast, Pinggao Electric (mainly GIS) and China XD Electric (mainly switches, transformers) are “pure” UHV hardware manufacturers. Therefore, for investors seeking the highest “Beta” exposure and most direct benefit from the 650 billion investment acceleration¹⁵, Pinggao Electric and China XD Electric are the most elastic and direct targets.

3.6 Core Equipment Competitive Landscape Summary

The following table (Table 3) summarizes the competitive landscape of the midstream core equipment segment, A-share leaders, and their unique investment logic.

Table 3: UHV Midstream Core Equipment Competitive Landscape (A-Share)

Data Source: Comprehensive analysis based on¹¹

Part 4: Conclusion and Investment Outlook: Grasping “Certain” Order Explosions

4.1 Investment Thesis Summary

China’s UHV construction is in an unprecedented investment peak driven by the national rigid demand of “renewable energy consumption”¹. State Grid’s record investment expected to exceed 650 billion RMB in 2025¹⁵, along with major projects like “Southeast Tibet to Greater Bay Area” scheduled for approval in 2025⁷, provide strong demand evidence for this prosperity cycle.

4.2 Supply Chain Value Return

In the complete UHV supply chain, value and profits are highly concentrated in the midstream core equipment segment. Although upstream materials (like towers, cables) and downstream engineering construction also benefit, their profit elasticity is far lower than that of midstream oligopolies due to relatively fragmented competition patterns¹¹.

4.3 Core Targets Outlook

The national team integration marked by the establishment of China Electrical Equipment Group (CEEG)¹³ and the resulting stable oligopolistic competitive landscape¹⁷ have firmly locked in the profitability and market share of midstream core leading enterprises.

Investment portfolios should focus on the A-share market’s “Midstream Five Tigers”, which will divide the largest share of this investment feast:

1. NARI Technology (600406.SH): The most stable growth “grid brain,” benefiting from dual logic of new construction and existing transformation¹.
2. XJ Electric (000400.SZ): Absolute leader of DC “heart” (converter valves), with strongest certainty during DC project explosion periods¹³.
3. Pinggao Electric (600312.SH): AC “switch” (GIS) leader with purest business, highest performance elasticity in this cycle¹¹.
4. TBEA (600089.SH): “Transformer” king with deep moat in global transmission and distribution¹⁶.
5. China XD Electric (601179.SH): Most comprehensive equipment giant, sharing high performance elasticity¹¹.

References