Equity Research: Power Equipment & New Energy

Sector Weekly: The DC Power Revolution in China’s Data Center Expansion Cycle

Date: January 12, 2026
Analysts: Fu Honghao (S1050521120004), Zang Tianlv (S1050522120001)
Rating: OVERWEIGHT (Maintained)

Executive Summary

The Chinese data center (IDC) industry is entering a phase of explosive growth and structural technological upgrading, driven primarily by the surging demand for AI computing power. We estimate the domestic IDC market size will exceed RMB 318 billion in 2025, representing a year-on-year growth of approximately 14.7%, with a projected compound annual growth rate (CAGR) of 25-28% through 2030, potentially reaching RMB 1.2 trillion. Concurrently, the IT load scale is expected to grow from 7.05GW in 2025 to 9.37GW in 2030.

This expansion is not merely quantitative but qualitative. Leading internet giants—including ByteDance, Alibaba, and Tencent—are significantly accelerating capital expenditures (CapEx) on AI infrastructure. ByteDance plans to invest ~RMB 160 billion in 2026, while Alibaba has committed over RMB 380 billion for cloud and AI hardware infrastructure from 2025 to 2027. This surge in high-density AI workloads is catalyzing a critical shift in power architecture: the transition from traditional AC power distribution to High-Voltage Direct Current (HVDC) and Solid-State Transformer (SST) systems. HVDC offers superior energy efficiency, stability, and space utilization, making it the preferred solution for next-generation AI data centers.

Consequently, we identify DC power supply equipment as the primary beneficiary of this upgrade cycle. We maintain an "Overweight" rating on the Power Equipment sector. Our top picks include companies with established technical advantages in HVDC/SST technologies and IDC power solutions, such as Jinpan Technology, Sifang Shares, Liangxin Shares, Zhongheng Electric, Megmeet, and Outland. Additionally, we highlight opportunities in thermal management and energy storage integration with Sungrow and Tongfei Shares.

While the photovoltaic (PV) sector faces short-term headwinds from rising silver prices and policy shifts regarding export tax rebates, the long-term trajectory for green microgrids remains supported by new government guidelines. However, the immediate alpha generation potential lies within the AI-driven power infrastructure upgrade.

Key Takeaways

1. Data Center Market: Explosive Growth Driven by AI CapEx

• Market Scale & Growth: The Chinese IDC market is undergoing a super-cycle. The market size is projected to break RMB 318 billion in 2025 (+14.7% YoY) and reach RMB 1.2 trillion by 2030 (CAGR 25-28%). The IT load capacity is expected to rise from 7.05GW in 2025 to 9.37GW in 2030 (CAGR 5.85%).
• Hyperscaler CapEx Acceleration:
  • ByteDance: Plans to invest approximately RMB 160 billion in 2026 specifically for AI infrastructure, with roughly 50% allocated to advanced AI processor procurement.
  • Alibaba: Announced a massive RMB 380 billion+ investment plan for cloud and AI hardware infrastructure spanning 2025-2027. This three-year commitment exceeds the total investment of the previous decade, signaling a decisive long-term strategic pivot.
  • Tencent: While specific annual CapEx figures were not disclosed, the company has explicitly stated its intent to heavily invest in AI capabilities and cloud infrastructure to capitalize on foundation model opportunities.
• Implication: The sheer magnitude of these investments confirms that the "AI Infrastructure Build-out" is no longer a narrative but a tangible, balance-sheet-backed reality. This creates a deterministic demand curve for upstream power and cooling infrastructure.

2. Technological Inflection Point: The Rise of HVDC and DC Architecture

• Shift from AC to DC: Traditional AC power distribution systems are struggling to meet the efficiency and density requirements of modern AI clusters. Leading internet firms are increasingly adopting High-Voltage Direct Current (HVDC) technology.
• Why HVDC?
  • Efficiency: Reduces energy conversion losses (AC-DC-AC conversions are minimized).
  • Stability: Provides more stable power delivery for sensitive, high-load AI chips.
  • Density: Supports higher rack power densities, which are essential for training large language models (LLMs).
• Investment Opportunity: This architectural shift creates a specialized niche for suppliers of HVDC rectifiers, DC distribution units, and related control systems. Companies with prior accumulation in DC technology and first-mover advantages are poised to capture disproportionate value.

3. Sector Recommendations & Stock Picks

We categorize our recommendations into three core themes within the Power Equipment sector:

Note: Kehua Data (002335.SZ) is also highlighted as a key player in the integrated IDC sector.

4. Photovoltaic Industry: Policy Shifts and Cost Pressures

• Export Tax Rebate Cancellation: The Ministry of Finance and State Taxation Administration announced that starting April 1, 2026, VAT export rebates for PV products will be cancelled. For battery products, the rebate rate will drop from 9% to 6% between April 1, 2026, and December 31, 2026, and be fully cancelled from January 1, 2027.
  • Impact: This policy aims to reduce low-price dumping and encourage high-value-added exports. It may lead to short-term price adjustments but supports long-term industry health by forcing efficiency improvements.
• Green Microgrid Mandate: Five ministries, including the MIIT and NDRC, issued guidelines for "Industrial Green Microgrid Construction (2026-2030)." New industrial solar and wind projects must achieve a local self-consumption rate of at least 60%. This drives demand for integrated storage and smart energy management systems.
• Price Trends:
  • Silicon Material: Prices are firming up. Dense recycled material is trading at RMB 53-60/kg. Inventory levels remain high, but producers are coordinating to stabilize prices.
  • Wafers: Prices are stabilizing with a slight upward trend. 183N wafers are trading at RMB 1.38-1.40/piece.
  • Cells & Modules: Rising silver prices (exceeding RMB 19,000/kg) are squeezing margins. TOPCon module prices have risen to ~RMB 0.70/W (domestic average). Overseas prices are also adjusting upwards due to cost pass-through.

5. Energy Storage Market: Bidding Activity Heats Up

• December 2025 Data: Total bidding for storage systems and EPC reached 22.5GW / 55.8GWh, with independent storage projects accounting for 90%.
• Regional Leaders: Xinjiang, Hebei, and Shanxi led the monthly bidding volume, each exceeding 6GWh.
• Price Trends: Average bids for both 2-hour and 4-hour systems rose month-on-month.
  • 2-hour system average bid: RMB 0.604/Wh (+1.7% MoM).
  • 4-hour system average bid: RMB 0.559/Wh (+13.2% MoM).
  • Analysis: The price increase suggests a stabilization of the severe price wars seen earlier in the year, potentially improving profitability for tier-1 manufacturers.

6. Robotics & AI Hardware: Physical AI Emerges

• Humanoid Robots: Global shipments in 2025 reached 13,000 units. Chinese manufacturers dominate:
  • Zhiyuan Robot: 5,168 units (39% market share, #1 globally).
  • Unitree Robotics: 4,200 units (32% market share, #2 globally).
  • UBTECH: 1,000 units (7% market share).
• CES 2026 Highlights: "Physical AI" is the new frontier. NVIDIA’s Jensen Huang emphasized the shift from parameter competition to ecosystem application. Unitree’s G1 humanoid robot demonstrated advanced dynamic balance and combat capabilities, highlighting rapid progress in actuation and control algorithms. This trend indirectly supports the power equipment sector through increased demand for high-performance motors, drivers, and power management ICs.

Detailed Industry Analysis

I. The Data Center Power Upgrade Cycle: A Deep Dive

1. The Macro Context: AI as the Primary Demand Driver
The convergence of large language models (LLMs) and generative AI has fundamentally altered the power profile of data centers. Unlike traditional web-serving or database workloads, AI training and inference require sustained, high-intensity computational power. This translates directly into higher rack power densities. Traditional racks operated at 4-6kW; modern AI racks often exceed 20-40kW, with some next-generation designs targeting 100kW+.

This density increase exposes the limitations of traditional AC power distribution:
* Losses: Multiple stages of AC-DC conversion result in significant energy loss (heat), increasing cooling loads.
* Space: AC switchgear and transformers occupy valuable floor space that could otherwise be used for compute resources.
* Reliability: AC systems are more susceptible to harmonic distortions and voltage sags, which can disrupt sensitive GPU operations.

2. The HVDC Solution
High-Voltage Direct Current (HVDC) distribution addresses these challenges by delivering power at a higher voltage (e.g., 240V, 336V, or even higher) directly to the server rack, where it is converted to low-voltage DC only once.
* Efficiency Gain: HVDC systems can improve overall power usage effectiveness (PUE) by 2-5%, a significant metric given the scale of hyperscale facilities.
* Scalability: Modular HVDC systems allow for easier scaling and maintenance without shutting down entire sections of the data center.
* Integration with Renewables: As data centers increasingly integrate onsite solar and storage (driven by the new Green Microgrid guidelines), DC-native architectures simplify the integration of these DC-source renewables.

3. Competitive Landscape and Beneficiaries
The shift to HVDC favors companies with deep expertise in power electronics, rather than traditional heavy electrical equipment manufacturers.
* Jinpan Technology (688676.SH): Originally known for dry-type transformers, Jinpan has successfully pivoted towards digitalized energy solutions for data centers. Their HVDC transformer and integrated power solutions are well-positioned to capture the upgrade cycle.
* Sifang Shares (601126.SH): A leader in power grid automation and protection. Their expertise in DC protection relays and control systems is critical for the safe operation of HVDC microgrids within data centers.
* Megmeet (002851.SZ) & Outland (300870.SZ): These companies specialize in switched-mode power supplies (SMPS). As server power supplies move towards higher efficiency standards (Titanium level) and higher power densities, these firms benefit from content-per-server increases.

II. Photovoltaic Sector: Navigating Policy and Cost Headwinds

1. Policy Impact: End of Export Rebates
The cancellation of VAT export rebates for PV products effective April 2026 is a landmark policy shift.
* Short-term Disruption: Exporters may face margin compression as they absorb part of the tax cost or pass it on to overseas buyers. This could temporarily dampen export volumes.
* Long-term Consolidation: The policy effectively raises the barrier to entry for low-margin, low-quality exporters. It encourages the industry to move up the value chain, focusing on high-efficiency modules (TOPCon, HJT, BC) and integrated energy solutions rather than commoditized panel exports.
* Global Price Dynamics: With Chinese exports becoming slightly more expensive, non-Chinese manufacturing (e.g., in India, US, Southeast Asia) may gain a marginal competitive advantage in protected markets. However, China’s cost leadership in the supply chain (polysilicon to wafer) remains intact, meaning Chinese firms will likely retain dominance despite the tax change.

2. Supply Chain Price Tracking
* Polysilicon: The market is seeing a tentative price recovery. Major producers are engaging in "self-discipline" to limit output and stabilize prices. With Q1 traditionally being a slow season, inventory management is key. We expect prices to remain stable to slightly firm in the near term.
* Wafers: The 183N size is becoming the mainstream standard, with transaction volumes increasing. Prices are holding steady at RMB 1.40/piece. The shift towards N-type wafers continues to accelerate, phasing out older P-type capacities.
* Cells: The rise in silver prices is a significant cost driver. Silver paste accounts for a substantial portion of non-silicon costs in TOPCon cells. Manufacturers are pushing for price hikes to offset this, leading to a temporary slowdown in transaction volumes as buyers resist.
* Modules: Domestic TOPCon module prices have adjusted upwards to RMB 0.70/W. Overseas prices vary by region, with Europe seeing prices around $0.087/W and the US remaining high ($0.27-0.30/W) due to trade barriers and compliance costs (FEOC rules).

3. Investment Implication for PV
While the long-term outlook for solar remains positive due to global decarbonization goals, the near-term investment case is mixed. The policy change introduces uncertainty, and rising raw material costs (silver, aluminum) pressure margins. We recommend a selective approach, favoring integrated leaders with strong balance sheets and diversified revenue streams (e.g., Sungrow) over pure-play module manufacturers.

III. Energy Storage: Stabilization and Growth

1. Market Dynamics
The energy storage market in China is transitioning from a "price war" phase to a "quality and service" phase. The recent uptick in bidding prices (especially for 4-hour systems) indicates that developers are prioritizing reliability and lifecycle performance over lowest upfront cost. This is crucial for the sustainability of the industry.

2. Key Trends
* Independent Storage Dominance: 90% of recent bids are for independent storage projects, which participate in electricity spot markets and ancillary services. This model is becoming more financially viable as market mechanisms mature.
* Longer Duration: The significant price increase for 4-hour systems (+13.2%) suggests growing demand for longer-duration storage, likely driven by the need to shift solar generation from midday to evening peak hours.
* Regional Concentration: Xinjiang, Hebei, and Shanxi are leading due to their high renewable penetration and grid congestion issues, necessitating local storage solutions.

3. Company Focus
* Sungrow (300274.SZ): As a global leader in both PV inverters and storage systems, Sungrow benefits from the synergistic demand for hybrid plants. Its strong brand and banking relationships give it an edge in international markets.
* Tongfei Shares (300990.SZ): While primarily a thermal management company, its role in cooling large-scale battery energy storage systems (BESS) is critical. As battery densities increase, so does the need for advanced liquid cooling solutions, where Tongfei is a key supplier.

IV. Emerging Themes: Robotics and Physical AI

The report highlights the rapid advancement in humanoid robots, with Chinese firms leading global shipments. While this sector is still in its early commercialization phase, it has implications for the power equipment sector:
* High-Performance Motors and Drives: Humanoid robots require compact, high-torque-density motors and sophisticated drive controllers. Companies like Megmeet and Inovance (not explicitly rated but relevant) are well-positioned to supply these components.
* Edge Computing Power: The "brain" of these robots requires powerful, energy-efficient edge computing modules, driving demand for specialized power management ICs and compact power supplies.

Risks / Headwinds

Investors should be aware of the following risks associated with the recommended sectors and stocks:

1. Technology Development Risks:

   • HVDC Adoption Speed: If the transition to HVDC in data centers proceeds slower than anticipated due to technical hurdles or legacy infrastructure lock-in, the revenue growth for HVDC-specific suppliers may be delayed.
   • AI Chip Efficiency: Breakthroughs in chip efficiency (e.g., lower power consumption per FLOP) could reduce the urgency for power infrastructure upgrades, although total compute demand is likely to outpace efficiency gains.

2. Competitive Intensification:

   • Power Equipment: The attractiveness of the AIDC power market may attract new entrants, leading to margin compression. Price wars, similar to those seen in the PV sector, could emerge in the HVDC component space.
   • PV Sector: Despite export tax changes, domestic competition remains fierce. Overcapacity in certain segments (e.g., standard modules) could persist.

3. Macroeconomic and Systemic Risks:

   • Capital Expenditure Cuts: If macroeconomic conditions deteriorate, hyperscalers (Alibaba, Tencent, ByteDance) might delay or scale back their CapEx plans, directly impacting order books for equipment suppliers.
   • Interest Rates: Higher interest rates can increase the cost of financing for large infrastructure projects (data centers, storage plants), potentially slowing down project initiation.

4. Company-Specific Execution Risks:

   • Performance Miss: Recommended companies may fail to meet earnings expectations due to operational inefficiencies, supply chain disruptions, or unexpected cost increases.
   • Valuation Volatility: Many of the recommended stocks (e.g., Megmeet, Outland) trade at relatively high P/E multiples, reflecting high growth expectations. Any miss in guidance could lead to significant multiple contraction.

5. Policy and Regulatory Risks:

   • Export Controls: Further restrictions on technology exports or imports (e.g., advanced chips, manufacturing equipment) could disrupt supply chains.
   • Grid Connection Policies: Changes in grid connection rules for renewable energy and storage could impact the economics of these projects.

Rating / Sector Outlook

Sector Rating: OVERWEIGHT (Maintained)

We maintain our Overweight rating on the Power Equipment sector. The structural shift in data center power architecture, driven by AI, provides a clear and durable growth runway that is largely decoupled from the cyclical downturns affecting other parts of the energy sector. While the PV sector faces near-term policy and cost headwinds, the long-term fundamentals remain intact, and the storage sector is showing signs of price stabilization.

Investment Strategy:
* Overweight: IDC Power Infrastructure (HVDC, SST, Power Supplies), Thermal Management for AIDC, Leading Storage Integrators.
* Neutral: Traditional PV Module Manufacturers (awaiting clarity on post-rebate pricing power), Wind Power (steady but slower growth).
* Underweight: Low-tier Inverter/Component Suppliers lacking technological moats.

Investment View & Company Analysis

Below is a detailed analysis of the key recommended companies, integrating financial forecasts and strategic positioning.

1. Jinpan Technology (688676.SH)

• Rating: BUY
• Current Price (2026-01-12): RMB 88.23
• EPS Forecast: 2024: 1.26 | 2025E: 1.71 | 2026E: 2.20
• P/E Ratio: 2024: 70.0x | 2025E: 51.6x | 2026E: 40.1x
• Investment Logic:
  Jinpan has successfully transformed from a traditional transformer manufacturer to a provider of digitalized energy solutions. Its dry-type transformers are widely used in data centers, wind farms, and high-end industrial applications. The company is heavily invested in R&D for HVDC and solid-state transformer technologies. As data centers adopt HVDC, Jinpan’s integrated power distribution solutions offer higher value-added compared to standalone transformers. The projected earnings growth (CAGR >20%) supports the current valuation, with the P/E ratio compressing to a more attractive 40x by 2026.

2. Sifang Shares (601126.SH)

• Rating: BUY
• Current Price (2026-01-12): RMB 32.92
• EPS Forecast: 2024: 0.86 | 2025E: 1.01 | 2026E: 1.19
• P/E Ratio: 2024: 38.3x | 2025E: 32.6x | 2026E: 27.7x
• Investment Logic:
  Sifang is a leader in power grid automation, protection, and control systems. Its expertise in DC protection is critical for the safe operation of HVDC data center microgrids. The company benefits from both the grid modernization trend (State Grid investments) and the private sector’s data center build-out. With a reasonable P/E ratio of ~28x for 2026 and steady earnings growth, Sifang offers a balanced risk-reward profile. Its strong cash flow and dividend history add to its appeal for institutional investors.

3. Liangxin Shares (002706.SZ)

• Rating: BUY
• Current Price (2026-01-12): RMB 11.77
• EPS Forecast: 2024: 0.28 | 2025E: 0.36 | 2026E: 0.44
• P/E Ratio: 2024: 42.0x | 2025E: 32.7x | 2026E: 26.8x
• Investment Logic:
  Liangxin specializes in low-voltage electrical appliances, with a growing focus on high-end segments including data centers and new energy vehicles. High-voltage circuit breakers and intelligent distribution units are core components in the new DC power architecture. The company’s ability to provide customized, high-reliability solutions gives it a competitive edge. The valuation is attractive, with a forward P/E of under 27x, reflecting solid earnings visibility.

4. Megmeet (002851.SZ)

• Rating: BUY
• Current Price (2026-01-12): RMB 100.81
• EPS Forecast: 2024: 1.08 | 2025E: 1.51 | 2026E: 2.07
• P/E Ratio: 2024: 93.3x | 2025E: 66.8x | 2026E: 48.7x
• Investment Logic:
  Megmeet is a leading provider of power electronics, including server power supplies, EV chargers, and industrial power units. Its server power supply business is directly exposed to the AIDC boom. The company’s R&D capabilities allow it to develop high-efficiency, high-density power modules required by AI servers. While the current P/E is high, the rapid earnings growth (expected EPS CAGR >30%) justifies the premium. Investors should monitor margin trends as raw material costs fluctuate.

5. Sungrow (300274.SZ)

• Rating: BUY
• Current Price (2026-01-12): RMB 169.05
• EPS Forecast: 2024: 5.32 | 2025E: 6.88 | 2026E: 7.74
• P/E Ratio: 2024: 31.8x | 2025E: 24.6x | 2026E: 21.8x
• Investment Logic:
  Sungrow is a global powerhouse in PV inverters and energy storage systems. Despite sector-wide headwinds, Sungrow’s diversified global footprint and strong brand allow it to maintain healthy margins. The company is benefiting from the global surge in storage demand, particularly in Europe and the US. Its valuation is compelling, with a forward P/E of ~22x, offering a margin of safety relative to its growth profile. Sungrow is a core holding for exposure to the global energy transition.

6. Tongfei Shares (300990.SZ)

• Rating: BUY
• Current Price (2026-01-12): RMB 89.35
• EPS Forecast: 2024: 0.86 | 2025E: 1.40 | 2026E: 2.13
• P/E Ratio: 2024: 103.9x | 2025E: 63.8x | 2026E: 42.0x
• Investment Logic:
  Tongfei is a specialist in precision temperature control, serving industries such as lithium battery manufacturing, data centers, and semiconductors. The shift to high-power AI chips increases the importance of advanced cooling solutions (liquid cooling). Tongfei’s technology is well-suited for this application. The company is experiencing rapid earnings growth, with EPS expected to more than double from 2024 to 2026. The high initial P/E reflects this growth expectation, but the ratio becomes more reasonable by 2026.

7. Zhongheng Electric (002364.SZ) & Outland (300870.SZ)

• Rating: NOT RATED (Watch List)
• Zhongheng Electric: A key player in HVDC power systems for data centers. With a forward P/E of ~56x (2026E), it is positioned to benefit from the HVDC trend. Investors should watch for order book announcements from major hyperscalers.
• Outland: Specializes in server power supplies. Similar to Megmeet, it is exposed to the AIDC power upgrade. Its valuation is high (60x P/E in 2026E), requiring strong execution to justify.

8. Kehua Data (002335.SZ)

• Rating: NOT RATED (Watch List)
• Logic: An integrated IDC service provider and UPS manufacturer. Kehua benefits from both the construction of new data centers and the provision of critical power infrastructure. Its dual role makes it a comprehensive play on the IDC theme.

Market Performance Review

Last Week’s Performance (Jan 5 - Jan 9, 2026):
* Power Equipment Sector: +5.02% (Rank 12/28 sub-sectors).
* Outperformance: Beat Shanghai Composite by 1.21% and CSI 300 by 2.24%.
* Top Gainers:
* Goldwind Science & Technology: +56.57% (Driven by wind power policy optimism).
* Taisheng Wind Power: +46.85%.
* Hongxun Technology: +36.33%.
* Top Losers:
* Zhongli Group: -13.57%.
* EGing Photovoltaic: -6.49%.

The strong performance of the Power Equipment sector, particularly in wind and specific power tech stocks, validates our positive outlook. The rotation into AI-infrastructure-related power stocks is gaining momentum.

Conclusion

The intersection of AI computing demand and energy infrastructure is creating a unique investment window in the Chinese Power Equipment sector. The transition to HVDC and DC-powered data centers is not a speculative trend but a necessary engineering evolution driven by the physics of high-density computing. Companies like Jinpan Technology, Sifang Shares, and Megmeet are well-positioned to capture this value.

While the PV sector navigates policy adjustments, the broader energy transition story remains intact, with Sungrow standing out as a resilient global leader. Investors should prioritize companies with technological moats in power electronics and thermal management, as these will be the bottleneck solutions in the AI era.

We reiterate our Overweight rating on the sector and recommend building positions in the aforementioned key beneficiaries, while monitoring execution risks and macroeconomic indicators.

Appendix: Financial Data Summary

Source: Wind, Huaxin Securities Research. Note: Unrated earnings forecasts are taken from Wind consensus estimates.

Disclaimer

This report is prepared by Huaxin Securities Co., Ltd. ("Huaxin Securities") and is intended solely for the use of its clients. The information contained herein is derived from sources believed to be reliable, but Huaxin Securities does not guarantee its accuracy or completeness. The opinions expressed in this report reflect the personal views of the analysts at the time of publication and are subject to change without notice. This report does not constitute an offer or solicitation to buy or sell any securities. Investors should conduct their own independent assessment and consult with professional advisors before making any investment decisions. Huaxin Securities and its affiliates may hold positions in the securities mentioned and may engage in transactions related to them.