China XD Electric Co., Ltd. has abundant orders on hand and continues to expand overseas markets.

Standing briefly at the gate of one of China XD Electric Co., Ltd.'s (601179.SH) factory sites in Xi'an, one can see several trucks coming and going—a bustling scene that reflects the company's ample orders on hand and the high capacity utilisation rate of its core products, such as high-voltage switches and transformers, amidst the industry's prosperity.

Recently, a reporter from Cailian Press visited China XD Electric and learned that the third round of ultra-high-voltage (UHV) power grid construction in China is entering an accelerated phase, from which the company is significantly benefiting, and this high level of prosperity is expected to continue in the future. In overseas markets, the company focuses on countries along the Belt and Road Initiative. With the support of manufacturing bases in Indonesia and Egypt, it aims to seize opportunities arising from the ageing power grids in Europe and the growing electricity demand in Southeast Asia, continuously expanding its overseas market presence.

Ample orders on hand

Currently, China is in the accelerated phase of the third round of UHV power grid construction, primarily addressing issues such as the construction of power transmission grids for the "large-scale wind and solar power bases" in north-west China, under the backdrop of building a new-type power system dominated by new energy.

A relevant person from China XD Electric told a reporter from Cailian Press that the company currently has ample orders on hand. Based on the company's revenue scale of 22 billion yuan last year, it is roughly estimated that the orders carried over to this year amount to around 10 billion yuan in total.

The ample orders on hand are also reflected in the company's capacity utilisation rate. The aforementioned relevant person stated that the company's comprehensive production capacity has been fully released recently. Specifically, in the company's two major business segments, the capacity utilisation rate for high-voltage switches and transformers is even higher, approaching full capacity.

Regarding the order delivery schedule, an industry insider told a reporter from Cailian Press that the delivery cycle for conventional voltage-related products is generally around 6-12 months. Due to their special nature, UHV products have longer delivery cycles, with DC and AC projects taking approximately 12-18 months and 18-24 months, respectively. "Most orders placed in the previous year are typically delivered in the following year."

To better digest the orders, a relevant person from the company stated that corresponding production line optimisations and upgrades have been carried out since last year. Appropriate investments have been made in areas with capacity bottlenecks, such as increasing the production capacity of transformers and their core components. Currently, the overall production capacity can meet the demand for order production.

According to statistics from the company's bid-winning announcements compiled by a reporter from Cailian Press, the total value of projects won by China XD Electric in 2024 for power transmission and transformation, UHV, and other projects from the State Grid Corporation of China was approximately 8.527 billion yuan, accounting for nearly 40% of the company's revenue in 2024.

With the growth in demand from power grid customers, some investors are concerned about the potential issue of major customers occupying funds. In response, the company stated that power grid customers generally have abundant cash flow and good creditworthiness. After order delivery, the company only needs to focus on finalising tasks such as accounts receivable, and the progress in handling accounts receivable has been satisfactory in the past two years.

Financial data showed that from 2022 to 2024, the company's accounts receivable remained at around 10 billion yuan annually. During the same period, its revenue reached 18.761 billion, 21.204 billion, and 22.281 billion yuan, up 30.42%, 13.02%, and 5.07% YoY respectively, while net profit stood at 619 million, 897 million, and 1.054 billion yuan, up 13.78%, 44.92%, and 17.50% YoY respectively.

Company representatives acknowledged that non-grid business is one of their key markets, but compared to grid customers, it requires more effort to control delivery schedules and payment cycles.

Regarding industry prospects, China XD and Pinggao Electric (600312.SH) recently stated in their 2024 financial reports that UHV construction has entered an acceleration phase. State Grid Corporation of China's investment is expected to exceed 650 billion yuan for the first time in 2025, hitting a record high, with continuous release of UHV equipment tender demand.

Expanding Overseas Markets

Analyzing overseas markets, China XD representatives told Cailian Press that against the backdrop of aging power grid infrastructure abroad and surging new energy grid connection demands amid global energy transition, China's power transmission equipment is gaining overseas traction through technical adaptability, cost advantages, and entire industry chain synergy.

The company revealed it is optimizing subsidiary support mechanisms for international business expansion, extending operations to Turkey, Italy, Sweden, etc., persisting in both standalone equipment exports and system integration to continuously develop overseas markets.

Public information shows the company increased equipment export share in 2024, winning bids including converter transformers for Brazil's northeast new energy UHV DC project, Turkey's Akkuyu 550kV GIS project, Bangladesh substation EPC, and Malaysia transmission line projects.

Additionally, China XD holds significant overseas orders. Previously, it partnered with China Southern Power Grid to win Chile's KiIo HVDC converter station EPC project, with 2.6832 billion yuan pending fulfillment by the end of 2024 under contracts valid until 2028.

Overall, China XD's overseas revenue from 2022 to 2024 was 2.546 billion, 2.268 billion, and 2.825 billion yuan, accounting for approximately 14%, 11%, and 13% of total revenue respectively.

Company representatives noted that amid complex global dynamics, overseas operations carefully consider potential risks, currently focusing on Belt and Road countries, with Indonesia and Egypt serving as manufacturing bases and core markets.

Public information shows that XD Indonesia has the production capacity for 70kV-500kV power transformers, with an annual production capacity of 6000MVA, making it one of the manufacturers in Indonesia with the strongest capability to produce 500kV voltage transformers. XD Egypt is the first company in the Middle East and North Africa region capable of manufacturing 500kV extra-high voltage power transformers and gas-insulated metal-enclosed switchgear.

It is reported that in recent years, the aging of power grid equipment in developed economies such as Europe and Japan has continued to be a prominent issue, with approximately 40% of distribution networks in Europe having been in use for over 40 years. Recent power outages across Spain and Portugal, as well as in parts of southern France, have sounded the alarm on the importance and urgency of power grid construction.

In the markets of developing countries, the IEA (International Energy Agency) predicts that major Southeast Asian countries such as Indonesia and Vietnam, due to population growth and industrial relocation, are expected to require an average annual investment growth rate of 30% in electricity (including power supply) to meet demand. The average annual investment in Southeast Asia's power grid from 2026 to 2030 may reach $30 billion.