DONGFANG ELEC (01072) saw its shares rise more than 6% at one point during trading. At the time of writing, the stock was up 2.73%, trading at HK$40.66, with a turnover of HK$642 million. A research report from UBS stated that, based on conservative estimates, each 1 gigawatt of gas turbines sold by DONGFANG ELEC to the United States could increase the company's earnings by approximately 16% to 20%. The firm views DONGFANG ELEC as its top pick within China's energy sector.

Investors generally hold the view that China does not face a power shortage and that its power infrastructure is relatively new, leading to low expectations for domestic power equipment demand. However, UBS believes this perspective is mistaken. The bank estimates that China's medium-term electricity demand growth will be 8-9%, double the market consensus of 4-5%. Within this above-consensus forecast, approximately 2.5 percentage points are attributed to artificial intelligence, 1.5 percentage points to manufacturing, and 1 percentage point to electrification.

Furthermore, there is significant replacement demand for coal-fired power plants. Approximately 420 gigawatts (GW), accounting for about 10% of total capacity, need to be replaced within the next 5 to 8 years. While some of this demand may be met by renewable or nuclear energy, the report suggests that investors are overlooking this substantial replacement requirement.