Dongfang Electric (01072.HK): Riding the Tailwind of US Data Center Backup Power Demand

$DONGFANG ELEC(01072.HK) Dongfang Electric (01072.HK) is in discussions with multiple U.S. data center customers regarding the export of gas turbine generator sets. Benefiting from the expansion of high-density computing power driven by artificial intelligence, data centers' demand for stable and rapidly deployable distributed self-contained power sources continues to rise, providing the company with increased order intake visibility. The company can now independently export 15MW and 50MW gas turbine equipment without restrictions from foreign partners. Data centers, considering stability and maintenance convenience, prefer to configure multiple small 6–50MW units within a single campus to create redundancy and reduce single-point failure risks, which aligns well with the company's existing product portfolio. This year, the company has successfully delivered three 50MW gas turbine units to a Kazakh utility customer, demonstrating its capabilities in overseas project execution and product reliability, providing an important reference case for entering the North American data center market.

In the high-power gas turbine sector, the company still relies on overseas technical partners for key forgings and blades and is currently not authorized to export products above 50MW, which constrains short-term overseas expansion for ultra-large units but also drives the company to focus resources on small and medium power segments that better meet data center needs. Compared to global peers, industry leader GE Vernova has already locked in over half of its 2029 gas turbine capacity and expects most of its 2030 capacity to be sold by the end of 2026, reflecting tight global gas turbine capacity and accelerating customer order commitments, benefiting suppliers with strong technical and delivery capabilities to share in pricing and order advantages.

Looking ahead, if the company can accelerate improvements in gas turbine reliability and gradually secure North American market certifications while managing compliance risks, it may establish a first-mover advantage in the data center backup and peak-shaving power supply sector through batch shipments of small units. Meanwhile, the company has stable backlogs and technical expertise in traditional sectors such as thermal, nuclear, and hydropower equipment, combined with structural growth in gas turbines and new energy equipment, potentially driving phased increases in overall revenue and gross margins while improving profitability and cash flow performance.

Source: KGI Securities