Pinggao Electric: UHV deliveries lift profits, while order backlog supports future growth

What drove third-quarter profit growth?

In the third quarter of 2026, Pinggao Electric recorded revenue of 2.8 billion yuan and net profit of 414 million yuan, with net profit up 30.5% year on year. Gross margin reached 29.7%, up 4.3 percentage points year on year but unchanged from the second quarter: profitability improved from a year earlier and remained stable quarter on quarter.
Morgan Stanley attributes the gross margin improvement to increased deliveries of UHV GIS (gas-insulated switchgear). In the third quarter, deliveries of 1,000-kV and 750-kV GIS were 4 and 42 units respectively, up from 2 and 35 units in the second quarter. Orders moving into the delivery phase are an important link in this profit growth.

By the end of the third quarter, the company had delivered 11 units of 1,000-kV GIS during the year, and the remaining 4 units for the Aba project are expected to be delivered in the fourth quarter. Management also expects to deliver 2 units for the Zhumadian expansion project and 1 unit for the Liantang expansion project. These arrangements underpin Morgan Stanley’s view that full-year deliveries could exceed the target.
Orders on hand provide a pipeline after these deliveries. At the end of the third quarter, the company had an order backlog of 16.5 billion yuan, including 51 units of 1,000-kV GIS. On this basis, Morgan Stanley believes earnings growth has relatively high visibility, supported by the existing project backlog and its subsequent delivery.

New orders in the first nine months of 2026 totaled 13.9 billion yuan, up 15.3% year on year. Of these, orders for high-voltage products, including GIS, amounted to 11 billion yuan, up 20% year on year; orders for medium- and low-voltage projects totaled 2.6 billion yuan, down 4%. Order growth was driven mainly by high-voltage products, while the medium- and low-voltage business moved in the opposite direction.
Grid projects also support medium-term demand. State Grid expects the total scale of UHV projects under construction during the fifteenth Five-Year Plan period to exceed the combined scale of those in the thirteenth and fourteenth Five-Year Plan periods. One AC and two DC UHV projects recently approved have a planned total investment of 59.1 billion yuan, providing a project base for subsequent equipment tenders.
Turning the project pipeline into company performance still depends on the pace of tendering and execution. The main downside factors identified by Morgan Stanley include slower tendering for AC and DC lines, and gross margin pressure from intensified competition or weaker cost control.

Pinggao won one of two contract packages for the Wuhu 500-kV GIL (gas-insulated transmission line) project in State Grid’s fourth batch of UHV tenders. The contract is worth 137 million yuan and covers 11.4 kilometers, corresponding to an average price of approximately 12 million yuan per kilometer.
This is the first large-scale GIL tender since the Sutong project. Beyond the revenue from this contract, its significance for future assessments lies in establishing a pricing benchmark for future projects.

Morgan Stanley maintains its Overweight rating and a target price of 25.70 yuan, implying upside of approximately 24% from the 20.67 yuan closing price on 21 October 2026 used in the report. Its model forecasts net profit of 1.351 billion, 1.634 billion and 1.874 billion yuan respectively for 2026–2028.
The target price uses a discounted cash flow method covering long-term cash flows from 2027 to 2037. Key assumptions include a weighted average cost of capital of 8.2% and a perpetual growth rate of 2%. The valuation therefore depends on both near-term deliveries and the realization of longer-term earnings and cash flows.