Foreign capital has made a significant move against the market trend by acquiring a substantial stake in the grid equipment leader Henan Pinggao Electric Co.,Ltd. (SHSE: 600312). Concurrently, numerous grid equipment companies have issued preliminary forecasts for their 2026 mid-year results, with many expecting profits to more than double. These developments provide strong evidence that the 4 trillion yuan investment planned by State Grid during the "15th Five-Year Plan" period is being actively implemented.

On the evening of July 12, Henan Pinggao Electric Co.,Ltd. announced that it had crossed the 5% ownership threshold, with foreign investors now holding 5.42% of its shares. This tangible investment by international long-term funds into a leader in the ultra-high voltage (UHV) sector signals a strong endorsement of the value of state-owned enterprises and the sector's long-term certainty.

In a parallel trend, several other grid equipment companies, including Jiangsu Fengfan Co., Ltd., Hangzhou Cable Co., Ltd., and Dalian Electric Porcelain Co., Ltd., have released a flurry of preliminary 2026 mid-year earnings forecasts, with the highest projected growth exceeding 1000%. This surge in projected performance further confirms that the massive State Grid investment is rapidly translating into corporate earnings.

Foreign Investment in Pinggao Electric

According to the disclosure by Henan Pinggao Electric Co.,Ltd., shareholders Templeton Asset Management Ltd. and Franklin Templeton Investment Management Limited, acting through the Shanghai-Hong Kong Stock Connect, have collectively acquired 73.571928 million shares, representing 5.42% of the total share capital. The announcement clarified that this change represents a share purchase and does not constitute a takeover offer or alter the company's controlling shareholder or actual controller.

Both foreign shareholders are controlled by the same entity, Franklin Resources, Inc., and thus constitute a concerted action group. Prior to this purchase, they collectively held 4.96% of Pinggao's shares. The purpose of the purchase was stated as "investment only," with no intention to seek management or control. The funds originated from managed funds and client accounts under their discretionary management.

A separate report revealed that these foreign investors began aggressively buying shares of Henan Pinggao Electric Co.,Ltd. starting in April. Despite an 18.05% decline in Pinggao's share price between April 1 and July 10, they continued to accumulate shares, while shares of other grid equipment companies like Jinlihua Electric Co., Ltd. and Sifang Co., Ltd. rose significantly during the same period.

Rationale Behind the Strategic Investment

Why would foreign investors persistently increase their holdings during a price adjustment? Henan Pinggao Electric Co.,Ltd. is a core listed platform under State Grid's China Electric Equipment Group, a pivotal enterprise in China's electrical equipment industry and the dominant leader in domestic UHV GIS equipment, possessing high technical barriers and maturity in import substitution.

The company's 2025 annual report showed contract liabilities (orders on hand) of approximately 1.73 billion yuan, a year-on-year increase of 44.42%, and inventory growth of 14.07%, indicating rising new orders. The company has maintained positive operating cash flow since 2018 and steady year-on-year growth in net profit attributable to shareholders from 2022 to 2025, with a stable dividend payout ratio above 30% since 2017.

Against a backdrop of heightened global geopolitical tensions and macroeconomic volatility in 2026, foreign long-term capital is actively seeking "safe assets" characterized by stable cash flow, domestic demand drivers, and monopolistic competitive advantages. The stake acquisition clearly reflects recognition of the operational security and order certainty stemming from its state-owned enterprise background. The investors disclosed the possibility of further share purchases or sales within the next 12 months.

Domestic institutions are also bullish. As of Q1 2026, several major funds and insurance products, including the ChinaAMC CSI Grid Equipment Theme ETF and products from New China Life Insurance and China Life Insurance, were new or increased shareholders among the top ten tradable shareholders.

Mid-Year Profit Surge Across the Sector

If the foreign stake acquisition is a forward-looking capital signal, the dense cluster of positive 2026 mid-year profit forecasts from grid equipment companies is hard evidence of the sector's high prosperity transitioning from policy expectation to earnings realization.

As of July 14, 11 companies in the grid equipment sector had pre-disclosed mid-year forecasts, with 7 expecting positive growth. Jiangsu Fengfan Co., Ltd., Hangzhou Cable Co., Ltd., and Changgao Electric Co., Ltd. lead with expected net profit growth of up to 1022.64%, 957.82%, and 449.70%, respectively. Dalian Electric Porcelain Co., Ltd. and Xinlian Electronics Co., Ltd. also expect profits to more than double.

Jiangsu Fengfan Co., Ltd. attributes its dramatic turnaround from a 2025 loss to two main factors: benefiting from the industry trend of new power system construction and upgrading, which boosted its core tower business; and the strategic disposal of its loss-making photovoltaic subsidiary, Suzhou Jingying Photoelectric Technology Co., Ltd., which streamlined its business and provided a tax benefit.

Hangzhou Cable Co., Ltd. expects net profit to surge 852.03% to 957.82%, primarily due to a recovery in the optical fiber and cable market, with demand and prices rising simultaneously. Its subsidiary, Hangzhou Yongte Information Technology Co., Ltd., saw sales grow with the industry recovery. This marks a significant reversal from 2025 when asset impairments were taken due to price declines. The rebound is linked to surging AI-driven demand for optical fiber, with average prices rising sharply in Q1 2026.

Changgao Electric Co., Ltd. and Xinlian Electronics Co., Ltd. both reported strong headline profit growth, but a significant portion was attributable to non-recurring gains. After adjusting for these, their core operating profits actually declined year-on-year.

Contract Wins Securing Future Performance

In contrast, the strong performance forecast from Dalian Electric Porcelain Co., Ltd. is less affected by non-recurring items. The company attributes its growth to sustained market demand, synergistic domestic and international operations, and the concentrated confirmation of orders. As the absolute leader in UHV insulators, it has consistently benefited from demand driven by major power transmission projects.

Crucially, Dalian Electric Porcelain Co., Ltd. has secured multiple major contracts from State Grid's centralized bidding in 2026, as disclosed in February, May, and June, with the combined pre-winning bids amounting to significant portions of its annual revenue.

Similarly, other companies mentioned, including Henan Pinggao Electric Co.,Ltd. and Jiangsu Fengfan Co., Ltd., have disclosed winning major projects from State Grid or China Southern Power Grid throughout the first half of the year.

In summary, the foreign investment in Henan Pinggao Electric Co.,Ltd. and the surge in mid-year earnings forecasts across the grid equipment sector are not coincidental. They represent the tangible realization of the massive "15th Five-Year Plan" investments, materializing through the chain of contract wins, order backlogs, revenue recognition, and profit release. From the frequent major contract wins by companies like Pinggao and Dalian Electric Porcelain to the doubled earnings of Fengfan and Hangzhou Cable, evidence suggests the industry is transitioning from a policy-driven expectation phase into a fundamentals-driven super cycle.