New Stock Outlook | Resonating multiple industry opportunities, Kangjin Electrical's "AI+Going Abroad" brings new growth.

In recent days, Zhuhai Kangjin Electric Co., Ltd. (referred to as Kangjin Electric) has submitted an application for listing on the main board of the Hong Kong Stock Exchange, with FOSUN INTL Capital and Chuangsheng Financing acting as its joint sponsors. Public information shows that Kangjin Electric is a technology-driven integrated power equipment provider and smart energy management solutions provider. With decades of industry expertise, the company has developed a competitive "Source-Grid-Load-Storage" integrated platform, and its system integration capabilities can achieve comprehensive product coverage for the entire lifecycle of the power system. In recent years, as the global energy transition accelerates and the demand for smart grid upgrades in China continues to increase, coupled with a significant growth in overseas market demand for power infrastructure, this has driven a sharp increase in demand across various sectors for power equipment. At a time when the prosperity of the power equipment industry is on the rise, investors are paying close attention to Kangjin Electric's fundamentals and future growth potential. Double-digit revenue growth last year According to the prospectus, Kangjin Electric is a technology-driven integrated power equipment provider and smart energy management solutions provider. With decades of industry expertise, the company has developed a competitive "Source-Grid-Load-Storage" integrated platform, and its system integration capabilities can achieve comprehensive product coverage for the entire lifecycle of the power system. In terms of performance, the company's revenue has shown a trend of continuous growth. Kangjin Electric is expected to achieve revenues of approximately 638 million yuan, 824 million yuan, and 969 million yuan in 2022, 2023, and 2024, respectively, with annual profits of 51.79 million yuan, 56.24 million yuan, and 38.34 million yuan. In 2024, the company's revenue is expected to grow by 17.61% year-on-year, with a gross profit of 246 million yuan, a 6.76% increase year-on-year, and a gross profit margin of 25.36%. It is understood that Kangjin Electric's business is divided into two main segments: intelligent distribution network equipment and intelligent new energy business solutions. The intelligent distribution network equipment segment mainly includes ring net cabinets, transformers, high and low voltage complete sets of equipment, pole-mounted switches, while the intelligent new energy business solutions cover intelligent energy storage, intelligent charging systems, comprehensive energy projects, and energy management platforms. The company's solutions are deployed across multiple sectors, including infrastructure development, energy, industrial, commercial, building management, and transportation, making it a partner of two major state-owned power grid companies and leading enterprises in the oil, steel, and transportation industries. By business segment, the smart distribution network equipment business is the main contributor to performance, with this segment accounting for 91% of the company's revenue in 2024, with ring net cabinets sales accounting for 50.6%, transformers and high and low voltage complete sets of equipment accounting for 14% and 12.2% respectively. Starting in 2022, the company began preliminary production of smart energy storage and smart charging systems, and then began mass production and generated revenue in 2023. By the end of 2024, the company's smart charging systems had generated revenue of 17.565 million yuan, and smart energy storage had generated revenue of 3.28 million yuan. Thanks to the company's optimized procurement strategy, the inventory turnover days decreased during the reporting period, with inventory turnover days of 108 days, 107 days, and 103 days in 2022, 2023, and 2024 respectively. As of the end of 2024, the company's inventory was approximately 202 million yuan. Accounts receivable turnover days also decreased from 273 days to 266 days. As of December 31, 2024, the company's cash and cash equivalents had increased by 245.6% year-on-year to 159 million yuan, putting the company in a healthy financial position. As of December 31, 2024, Kangjin Electric has more than 1,800 customers, with over 300 customers having cooperated with the company for more than three years. The top five customers of the company accounted for 53.2%, 56.0%, and 53.3% of the total revenue for the same period from 2022 to 2024, respectively. The revenue share of the company's largest customer decreased from 28.9% in 2022 to 18.1% in 2024, indicating an optimized customer structure. Demand-driven industry high prosperity continues Under the continuous advancement of the "Dual Carbon" strategic goals, the Chinese power grid industry is accelerating its transformation towards intelligence and low-carbonization. By 2025, China's two major power grid companies - State Grid Corporation and Southern Power Grid Corporation - plan to invest at historically high levels, with the State Grid's 2025 investment expected to exceed 650 billion yuan for the first time, and the Southern Power Grid's fixed asset investment reaching 1750 billion yuan for the entire year. Data from Frost & Sullivan shows that the scale of China's grid investment is showing steady growth, with China's grid investment reaching 707.3 billion yuan in 2024, with a compound annual growth rate of 6.4%. It is expected to rise to 993.4 billion yuan by 2029, with a compound annual growth rate of 7.0%. As the energy transition advances, the structure of the power system is undergoing profound changes. In response to regional power supply-demand imbalances and the challenge of renewable energy integration, the industry has innovatively proposed the concept of "Source-Grid-Load-Storage" integration, marking a rapid transformation of the power system towards a new form of "multi-source synergy, source-grid coordination, supply-demand interaction, flexibility, and intelligence". According to the prospectus, Source-Grid-Load-Storage integration refers to the coordination of power sources, power grids, loads, and energy storage systems in the power system to form a synergistic working system. Compared to the traditional one-way process of "generation-transmission-transformation-distribution-use," this system can achieve efficient utilization of energy and optimize the balance between supply and demand. According to the prospectus disclosure, Kangjin Electric has established a strategic approach to drive both the smart grid equipment and smart new energy solution businesses, with a product portfolio including ring net cabinets, transformers, distribution automation terminal equipment, smart charging systems, and comprehensive energy projects and energy management platforms, covering a variety of energy application scenarios. In addition, through its proprietary "Source-Grid-Load-Storage" integrated platform, the company has established a self-developed technology ecosystem, including the AI Energy Brain, the next-generation energy time series database, and a distributed power IoT network. Information shows that the competitive landscape of the Chinese ring net cabinet market is relatively fragmented, and as of 2024, the top five manufacturers accounted for 20.3% of the market share based on ring net cabinet sales revenue. Among them, Kangjin Electric ranked third in the industry with a market share of 4.4%, establishing significant competitive barriers. According to the prospectus, in the ring net cabinet field, Kangjin Electric holds more than ten patents for solid, environmentally friendly, and atmospheric ring net cabinets, making it one of the companies with the highest number of patents in the Chinese ring net cabinet market. "AI+ Going Global" constructs two new growth poles While the company's overall business is transitioning towards new energy, technological innovation and internationalization are becoming new drivers of performance growth for Kangjin Electric. Public information shows that since the beginning of 2022, Kangjin Electric has been among the first to achieve deep integration of multi-dimensional heterogeneous big data and AI technology by using the AI Energy Brain-assisted platform to integrate real-time data on power generation, grid load, energy storage state of charge, user energy consumption patterns, etc., in the "Source-Grid-Load-Storage" data, achieving comprehensive digital AI analysis of energy systems. This system can use AI anomaly detection algorithms to identify equipment failures in real-time and provide recommendations and methods for dealing with them; in the event of emergencies, it can push out emergency response plans in real-time, achieving AI decision-making and intelligent operational assistance in various energy scenarios, helping customers reduce maintenance costs and eliminate safety risks. As of now, the company's research and development innovation has received multiple authoritative certifications. On December 14, 2024, the company's AI-enabled "Source-Grid-Load-Storage" integrated platform won the third prize at the 2nd National Energy Electronic Industry Innovation Competition held by the Ministry of Industry and Information Technology; the solid insulation ring net cabinet was recognized as a high-quality high-tech product in Guangdong Province by the Guangdong High-tech Enterprise Association; the environmentally friendly gas-insulated metal-sealed circuit breaker equipment was named an innovative product in Zhuhai by the Zhuhai Science and Technology Innovation Bureau; and the CKPM-301 programmable protection test and measurement device and CKPM-602 distribution automation terminal unit were recognized as high-tech products in Guangdong Province. Looking ahead, Kangjin Electric plans to promote its basic database system starting from proprietary database products and expand real-time flow computing analysis and system architecture reconstruction in key energy digitalization areas. In addition, the company will accelerate the iteration of its fully integrated edge gateway, enhance the specialization of energy applications in AI, and conduct component-level analysis and testing of digital energy products. The company plans to launch the industry's first wearable AI intelligent wearable device for operational assistance and safety inspection to create a second growth curve. At the same time, the global grid investment is experiencing structural growth opportunities, creating favorable conditions for CHINA POWER equipment companies to go global. It is understood that under the push of energy transformation and the update of aging grid equipment in developed economies, the demand for grid investments in regions such as Europe, Asia, the Americas, and Africa is growing rapidly. In addition, the shortage of capacity expansion and prolonged delivery cycles of overseas leading power equipment companies, among other supply side factors, create broad potential market space for CHINA POWER equipment companies to go global. Data from the International Energy Agency shows that global grid investment demand is expected to accelerate, reaching 775 billion dollars annually from 2031 to 2040, and 870 billion dollars annually from 2041 to 2050. In a net-zero emission scenario in 2050, grid investment will further increase, with annual investments expected to exceed one trillion dollars after 2035. Since entering the international market in 2012, Kangjin Electric has made significant breakthroughs in its overseas business. The company's financial report shows that due to the company's increased efforts to expand its overseas market, strengthen the business team's capabilities, and continuously explore overseas sales channels and models, its overseas market revenue (including but not limited to Australia, Kyrgyzstan, and Kuwait) has increased rapidly from 0.7% in 2022 to 3.8% in 2024. The company's overseas revenue experienced explosive growth from 7.5 million yuan to 36.5 million yuan from 2023 to 2024, with a staggering growth rate of 386.7%. Against the backdrop of the accelerating global energy transition, Kangjin Electric, with its forward-looking strategic layout, has established a dual-wheel development model of smart grid equipment and smart new energy solutions. With industry-wide multiple favorable conditions resonating, Kangjin Electric has the dual potential of sustainable performance growth and CKH HOLDINGS valuation improvement, making its future development worthy of close attention in the capital market.