Stock Price Reaches New High Yet Rushes to Hong Kong IPO: Huaming Equipment Stands at Global Expansion Window of AI Power Grid

In China’s capital markets, companies going public in Hong Kong typically fall into two scenarios: either they need funds to support business growth or they require a more international capital platform.

Huaming Equipment clearly belongs to the latter.

Recently, Huaming Equipment, the world’s second-largest and China’s leading switchgear company, officially submitted its listing application to the Hong Kong Stock Exchange. As a leader in its niche, its market value has increased more than 5.5 times since 2023, making it one of the most outstanding long-term bullish stocks in the electrical equipment sector.

What’s even more eye-catching is that in the three years prior to listing, the company paid out a massive dividend of 1.849 billion yuan, nearly matching its total profits over that period. On one hand, large dividends; on the other, leveraging to expand into Hong Kong—this seemingly contradictory capital operation actually conceals a broader strategic industry layout.

Against the backdrop of AI computing power explosion, aging global power grids, and energy transition, infrastructure investment in electricity is entering its strongest cycle in decades. Huaming Equipment’s move aims to secure a core position in the global supply chain during this cycle.

Performance and stock price both rising—why is Huaming Equipment still choosing to list in Hong Kong?

From a fundamental perspective, Huaming Equipment exhibits almost all the characteristics of an “excellent student”: stable profit growth, high gross margins rare in the equipment manufacturing industry, and rapidly rising overseas business.

According to the prospectus, from 2023 to 2025, revenue will grow from 1.946 billion yuan to 2.412 billion yuan, with net profit attributable to shareholders increasing from 551 million yuan to 720 million yuan. Notably, core power equipment revenue will surpass 2 billion yuan in 2025, with long-term gross margins around 50%.

More importantly, the company’s cumulative dividends over the past three years amount to 1.849 billion yuan, nearly equal to its total profits in that period. In other words, this is not a cash-strapped manufacturing enterprise.

But stability does not equal growth. Huaming Equipment does not urgently need capital infusion; instead, it is in an active expansion phase within a structurally upward industry cycle.

Over the past decade, Huaming Equipment has built barriers in the highly specialized field of transformer switchgear through deep cultivation, establishing technological, channel, and customer advantages. However, on the demand side, domestic grid investment remains steady but not in a golden expansion period; the larger growth potential lies overseas.

By 2025, overseas revenue will significantly increase to nearly 20%, with both direct and indirect exports rising sharply, and overseas gross margins generally 5-10 percentage points higher than domestic.

The core of future growth lies in the global market, which is a highly mature niche with high market concentration. Currently, the global switchgear industry is dominated by three major players: Germany’s Rhein-Hausen (MR), Huaming Equipment, and Japan’s Hitachi Energy, sharing over 80% of the market.

In such a market structure, even the growth of oligopolistic companies often depends on enhancing their global supply chain position; Huaming Equipment, ranked second globally and first in China by annual revenue, is no exception.

The Hong Kong stock platform can facilitate this leap. Through an “A+H” dual-capital structure, Huaming Equipment can more easily access low-cost international funds, supporting overseas acquisitions and local operations; it may even leverage the “Stock Connect” mechanism later to attract long-term global funds, internationalizing its shareholder structure and clearing trust barriers for its products entering mainstream Western power grids with strict supplier qualifications.

For a power equipment manufacturer, this step could determine its global competitive position for the next decade.

Optical modules in main power grids: coinciding with the HALO asset trend

Dissecting the AI industry chain reveals a classic structure: the most attention is on chip companies, followed by server manufacturers, but the most stable long-term profit may come from optical module companies.

The reason is simple: although optical modules are just key components, they are extremely difficult to replace.

Huaming Equipment’s core product, switchgear, is essentially an “optical module” within the power grid system.

Installed inside transformers, switchgear is used to regulate voltage levels, ensuring stable operation of the grid amid load fluctuations. This component is like a “blood pressure regulator” in the human circulatory system. Its importance lies not in visibility but in irreplaceability.

This industry naturally exhibits three typical features:

First, high technical barriers. Switchgear must switch frequently under high-voltage conditions while ensuring decades of stable operation, with technical complexity far exceeding ordinary power equipment.

Second, extremely long certification cycles. Once installed, power grid equipment typically has a lifespan exceeding 20 years, and any failure could pose systemic risks. Therefore, grid companies impose very strict supplier certifications, leaving little room for new entrants.

Third, high replacement costs. Once integrated into the grid, maintenance and repairs will generally continue throughout its lifecycle. This creates a very typical business model: “equipment + service” with long-term cash flow.

Huaming Equipment’s maintenance business has grown nearly 30% in recent years, with gross margins significantly higher than manufacturing. As the existing equipment scale expands, this segment will continue to generate profits.

Meanwhile, the company is actively shrinking its low-margin PV station EPC business to reallocate resources to core power equipment and CNC machinery manufacturing.

This strategic adjustment essentially reinforces its core competitive moat.

From an investment perspective, such companies align with the current capital market trend—HALO strategy. HALO stands for “Heavy Assets, Low Obsolescence,” referring to companies with substantial physical assets and low risk of obsolescence.

This core strategy has been recently proposed by mainstream Wall Street institutions. The logic is that as AI-driven, light-asset companies’ valuations become more volatile, capital begins to preemptively seek more cost-effective related targets. Companies with tangible asset barriers, physical attributes, stable business models, and low disruption risk are prime candidates.

Power grid equipment is a quintessential HALO asset. Huaming Equipment, a rare Chinese component leader with global capabilities in this sector, exemplifies this.

AI and the power grid era: a new global energy cycle

What truly shifts Huaming Equipment’s narrative is the changing structure of global electricity demand.

In the past decades, grid construction often synchronized with real estate cycles. But in the AI era, this logic is being broken.

The essence of the computing power revolution is an energy revolution.

Power consumption in large data centers is growing exponentially. By 2035, U.S. data centers are expected to account for over 8% of national electricity consumption, up from 3.5%. Meanwhile, the U.S. grid is severely aging, with transformer and transmission equipment supply in serious shortage.

At the same time, supply is also tight. Delivery cycles for transformers in North America have exceeded 100 weeks, with an import dependence of up to 80%. Under this supply-demand mismatch, the global power equipment supply chain is being redistributed. Chinese manufacturers with strong production capacity, delivery efficiency, and cost advantages are becoming key players.

Huaming Equipment is among them. Its overseas business is growing at an extremely rapid pace. By 2025, direct and indirect exports of power equipment will reach 714 million yuan, a 47% increase year-on-year.

Europe has become the largest market, with Asia accounting for about 30%, and North and South America markets opening rapidly. The company is also establishing assembly factories in Turkey and Indonesia, with plans to localize in Saudi Arabia.

This “local manufacturing + global sales network” model exemplifies the typical path for Chinese equipment companies expanding abroad.

Driven by technology, global grid investment is resonating strongly. Continuous growth in Chinese grid investment, accelerated grid construction in Europe amid energy transition, increased power demand from Southeast Asian industrialization, and large-scale renewable infrastructure development in Middle Eastern countries under “decarbonization” strategies—all point to a long-term trend: global grid investment entering a structural upward cycle, with high prosperity in regional and niche markets.

In this industry chain, key components like switchgear will remain essential demand drivers.

Conclusion

In the AI era, people often focus on the most dazzling tech giants. But the true backbone of the digital world may be those “more traditional” industrial enterprises.

Huaming Equipment might be standing at a re-pricing milestone in this historical cycle.