I. Overview of the Power Equipment Industry

　　Power equipment mainly comprises two major categories: power generation equipment and power supply equipment. Power generation equipment includes, among others, power plant boilers, steam turbines, gas turbines, hydro turbines, generators, transformers, and more. Power supply equipment primarily consists of transmission lines of various voltage levels, current and voltage transformers, contactors, and similar devices. There are numerous types of power equipment in an electrical system. Based on their different roles during operation, they are typically classified into primary electrical equipment and secondary electrical equipment. During use, power equipment is subject to factors such as wear and corrosion, which can reduce its reliability and potentially lead to technical degradation or even accidents. Power equipment condition monitoring and detection products primarily work by detecting and monitoring the electrical, mechanical, and other conditions of power equipment, thereby obtaining information about their operational status and quality. This allows for the timely identification of developing deterioration processes and enables prompt maintenance or replacement before potential failures occur or performance declines to a level that affects normal operation, thus ensuring the safety, stability, and reliability of the entire power grid.

　　In recent years, the state has continuously intensified its oversight of wire and cable manufacturing as well as power equipment, and testing standards have been steadily refined. Against the backdrop of increasingly stringent regulation, demand for power equipment testing continues to grow. Testing institutions with strong R&D capabilities and high brand recognition and credibility are poised to benefit first.

　　The upstream of China’s power equipment industry chain includes steel, electronic components, non-ferrous metals, instruments and meters, insulating parts, rubber and plastics, among others. The midstream comprises various power generation and power supply equipment. The downstream applications span fields such as thermal power generation, wind power generation, photovoltaic power generation, hydropower generation, biomass energy generation, and nuclear power generation.

　　II. Industry Background Analysis

　　The construction of smart grids is gradually shifting focus toward distribution networks, and the digitalization of power grids is accelerating. As a result, the power equipment testing industry is witnessing an upgrade in both demand and functionality. Currently, China’s smart grid backbone network structure is steadily improving, and grid development is increasingly shifting toward the distribution network side as well as undergoing comprehensive digital transformation across the entire grid. Meanwhile, after a period of large-scale smart grid construction, the existing operational assets have reached enormous scale. With the State Grid Corporation of China raising its annual fixed-asset investment target, the power grid sector continues to enjoy robust growth, opening up ample room for expansion in the power equipment condition monitoring and inspection industry. In 2022, major power enterprises nationwide collectively completed investments totaling 1,247 billion yuan, representing a 15.6% increase over the previous year. Investment in national power source projects reached 746.4 billion yuan, up 27.2% from the previous year. Investment in national grid projects totaled 500.6 billion yuan, up 1.8% over the previous year. Power source investment is accelerating, while grid investment remains at a relatively high level. As of January to July 2023, major power generation enterprises nationwide had completed investments of 401.3 billion yuan in power source projects, a year-on-year increase of 54.4%, and investments in grid projects reached 247.3 billion yuan, up 10.4% year-on-year.