AI computing power and grid upgrade two-wheel drive, behind Harbin Electric (01133) Yingxi
At a time when the global energy landscape is undergoing profound changes, the power equipment industry is entering a boom cycle driven by the intertwining of multiple macroeconomic factors. Recently, the positive profit forecast for the 2026 semi-year issued by Harbin Electric (01133) not only shows the restoration and growth of the company's own profits, but also reflects structural changes in the power equipment sector in the current macro environment.
According to the announcement, the company expects net profit attributable to owners of the parent company to reach about 1.7 billion yuan (RMB, same below) in the first half of 2026, a sharp increase of about 61.9% over 1.05 billion yuan in the same period last year. According to the Zhitong Finance App, Yingxi is not an isolated incident, but rather the result of a combination of two major factors: the global power grid upgrade and the increase in AI computing power demand. The implementation of Harbin Electric's performance is an observation sample of how industry sentiment is transmitted to leading companies.
Demand for power equipment ushered in historic expansion
To understand the macro background of Harbin Electric Yingxi, we must first examine the intergenerational changes that the global power infrastructure is experiencing. Power grid assets in developed economies were generally built in the 1970s and 80s of the last century. The actual operating life of transformers, switching equipment, and transmission lines is approaching or even exceeding the design life. The aging problem not only poses hidden operational reliability hazards, but also limits large-scale grid-connected consumption of new energy power generation. European and American countries have intensively introduced special investment plans for power grids in the past two years. The EU plans to add hundreds of billions of euros for cross-border grid interconnection and smart distribution system upgrades by 2030, while the US has clearly allocated tens of billions of dollars for grid resilience transformation through the Bipartisan Infrastructure Law.
These investments will gradually enter the bidding stage after 2025, and Chinese power equipment companies are increasing their participation in overseas markets with the technical advantages and cost competitiveness they have accumulated in the fields of UHV and FDC transmission. The power plant engineering division of Harbin Electric has been working for a long time in Southeast Asia, the Middle East, and Africa, and the progress in overseas supporting equipment exports in the past two years is worth paying attention to.
At the domestic level, policy strength has also been significantly strengthened. At the beginning of this year, the State Grid announced that fixed asset investment is expected to reach 4 trillion yuan during the “15th Five-Year Plan” period, an increase of 40% over the “14th Five-Year Plan” period, a record high. Meanwhile, the Bank of China International Research Report pointed out that in the “15th Five-Year Plan” for the construction of a new power system, China raised the 2030 installed target of pumped energy storage from 120 GW to 160 GW. This adjustment is beneficial to leading hydropower equipment companies. As one of the major suppliers of hydropower equipment in China, Harbin Electric is expected to achieve a compound annual growth rate of 20% in hydropower revenue between 2026 and 2028. The company has a certain market position in the field of thermal power, hydropower and autonomous gas turbine models. The improvement in gross margin also indicates that low-margin coal and electricity orders have basically been digested, and the overall gross margin and dividend payment ratio are showing an optimization trend. UBS also mentioned in a previous report that the increase in nuclear power capital expenditure and the increase in the visibility of orders over the years provided support for the company to enter an upward profit cycle.
Structural changes in domestic power grid investment are also noteworthy — unlike in the past, which simply relied on tenders for transmission and transformation equipment, the share of intelligent distribution side transformation, pumped energy storage access systems, and cross-regional power dispatch center construction has increased in this round of investment growth. These segments require complete equipment and system integration services with higher added value. The layout of Harbin Electric in the field of general contracting of power engineering and auxiliary equipment for power plants has benefited from the industry boom cycle. The company's new power supply equipment orders in 2025 reached 44 billion yuan, an increase of 26% over the previous year. Among them, orders for coal power and nuclear power increased by 39.4% and 81.6% respectively. The continued increase in order size laid the foundation for steady revenue growth and gross margin increase in the first half of the year.
AI computing power explosion reconstructs electricity supply and demand pattern
In addition to the upgrading of global power grids, the rapid growth in demand for artificial intelligence computing power is another important variable. The explosion of AI computing power is having an impact on the global electricity supply and demand pattern. As the core area of global AIDC construction, the US is facing new supply pressure. This is expected to provide some spillover opportunities for China's power equipment industry chain. The power consumption of data center clusters that large model training and reasoning rely on cannot be ignored.
What is more noteworthy is the data center's requirements for power supply quality — GPU servers are more sensitive to voltage drops, harmonic distortion, and instantaneous interruptions. Power supply disturbances may cause training tasks to be interrupted, which makes data center operators place higher demands on the dynamic response standards of power equipment.
According to the Bank of China International Research Report, Harbin Electric can use the expansion of artificial intelligence data centers in Southeast Asia to capture the demand for baseload power equipment by leveraging its accumulation in thermal power, hydropower, and autonomous gas turbine models. At the same time, the expansion of overseas production is expected to offset the contraction of domestic coal and electricity business to a certain extent. Although Harbin Electric is not directly involved in low-voltage power distribution equipment for data centers on a large scale, its accumulation in the field of large-scale generator sets and high-voltage transmission and transformation enables it to participate in this market by providing core equipment for dedicated substations and self-owned power plants supporting data centers. In particular, gas turbine combined cycle units and waste heat boiler systems are regarded by the industry as one of the options for power supply solutions for large data center parks because of their quick start-stop and peak-shifting capabilities. Considering the rapid expansion trend of AI data centers in Southeast Asia and other places, the company's technical accumulation in the gas turbine field is expected to become a new growth point in the future.
From a longer-term industrial perspective, the impact of AI computing power on the power system may drive changes in the evaluation system of the power equipment industry. The weight of power supply reliability, equipment response speed, and maintenance costs throughout the life cycle has increased, and leading companies with technological leadership, brand reputation, and engineering experience are expected to gain some premium space.
Against the backdrop of performance exceeding expectations, several brokerage firms have given different levels of valuation judgments to Harbin Electric. Huatai Securities believes that the increase in the company's high-margin orders has led to the implementation of performance, and the combined internal cost reduction has been effective. It maintains a “buy” rating and gives a target price of HK$24.94, corresponding to the forecast of 13.6 times the price-earnings ratio in 2026. UBS, on the other hand, is more optimistic, pointing out that Harbin Electric's net profit for the first half of the year has reached about 50% of its full-year forecast, which is expected to drive the market to adjust its profit forecast for the full year 2026. At the same time, potential inclusion in Hong Kong Stock Connect in August may form an additional valuation catalyst, giving a “buy” rating and a target price of HK$45.
Risk factors cannot be ignored
On the other side of the boom story, several risk factors are also worth paying attention to.
In overseas markets, escalating geopolitical frictions may cause some countries to adopt restrictions on imports of power equipment to China. There is uncertainty about the project approval process and capital return cycle in core markets such as the Middle East and Southeast Asia, which may affect the actual delivery pace and profit margin of overseas orders.
At the domestic market level, the annual implementation pace of “15th Five-Year Plan” power grid investment may be affected by macroeconomic fluctuations or policy priority adjustments. If the actual bidding progress or investment amount falls short of planned expectations, it will directly affect the company's acquisition of new orders. Furthermore, traditional thermal power equipment still accounts for a significant share of the company's domestic business structure. Under the medium- to long-term energy transformation trend, the continued contraction of this sector may be a drag on overall revenue.
It is worth mentioning that as more domestic power equipment companies step up their overseas expansion efforts, competition in the international market is intensifying, which may also suppress future product pricing and gross margin levels.
Taken together, Harbin Electric's current success has provided a microscopic view of the transmission of the global power equipment industry's sentiment. At the industry level, the two-wheel drive logic required for power grid upgrades and AI computing power has medium- to long-term industrial support; at the company level, the improvement trend in order structure and gross margin still needs to be continuously verified in subsequent quarters.
For market participants, the actual pace of implementation of the economic narrative, the progress of overseas market expansion, and the final results of the inclusion of Hong Kong Stock Connect will be key variables affecting the stock's subsequent trend, and it is worth continuing to track. Whether the power equipment industry can achieve the transformation from traditional manufacturing to high value-added services in this cycle is not only about the valuation trend of a single Harbin Electric company, but also about restructuring the long-term competitiveness of the entire Chinese power equipment industry in the midst of global energy changes.