Caitong: The trend of peak regulation in the gas internal combustion engine industry has formed, and we are optimistic about the overall industry outlook.

Caitong released a research report stating that gas turbines cover the main peak shaving and large cluster base load power supply at the regional level due to higher efficiency and lower electricity costs. The overseas major gas engine manufacturers are restrained in their expansion pace, and the supply-demand gap will persist in the long term. The core reason is that the expansion cycle of the top manufacturers (3-5 years) lags behind the outbreak of demand for AIDC and peak shaving. Looking at the three major engine manufacturers, GEV, Siemens Energy, and Mitsubishi Heavy Industries have full order backlogs scheduled to 2029. Benefiting from factors such as the increasing proportion of natural gas as a clean energy source, the growth of off-grid electricity demand in overseas industrial mines, and the outbreak of AIDC electricity demand, the prospects for the entire industry chain of gas turbines and gas engines are promising. Caitong's main points are as follows: AI-driven gas turbines and gas engines are prosperous Gas turbines with minute-level response are the main electric base load, and gas engines with second-level response are suitable for peak shaving. Gas turbines (simple cycle CT, combined cycle CCGT) cover the regional main peak shaving and large cluster base load power supply due to higher efficiency and lower electricity costs. Reciprocating gas-fired generating units with moderate investment and rapid response are suitable for data center backup and peak shaving demand, and more and more North American data centers are using gas engines as the main power source. Gas turbines: Overseas three major heavy-duty engine manufacturers have order backlogs scheduled until 2029, and the significant gap between electricity supply and demand The expansion pace of overseas major heavy-duty engine manufacturers is restrained, and the supply-demand gap will persist in the long term. It is estimated that the intended global heavy-duty orders will exceed 80GW by 2025, while the actual deliverable capacity is only about 50GW. Mitsubishi Heavy Industries estimates that the demand for GTCC combined cycle heavy-duty engines may approach 100GW, and the supply-demand contradiction is significant. The core reason is that the expansion cycle of the top manufacturers (3-5 years) lags behind the outbreak of demand for AIDC, peak shaving, etc. Looking at the three major engine manufacturers, GEV, Siemens Energy, and Mitsubishi Heavy Industries have full order backlogs scheduled until 2029. It is expected that the peak demand gap for US data centers in 2028 may reach 42.8GW. In the background where ground photovoltaics, nuclear power, and space photovoltaics are difficult to alleviate in the short term, gas turbines have become a core power source, and supply constraints will continue to create opportunities for alternative technological routes. Gas engines: Overseas gas engine manufacturers are expanding clearly, and more and more data centers are being used as the main power source Benefiting from the high prosperity of AIDC, the growth of heavy-duty trucks at mines, and off-grid electricity demand, Caterpillar, Cummins, and Wrtsil have formed a differentiated product layout. Caterpillar plans to double the total capacity of "gas engines + gas engines" from 25GW in 2024 to 50GW by 2030. In 2025, it has already won four main power orders for data centers exceeding 1GW and expects data center orders to exceed $2 billion in 2026. Cummins focuses on the 95L high-speed engine, suitable for small and medium-sized data center backup power and peak shaving, with plans to double the 95L capacity by 2025 and schedule power generation business until 2028. Wrtsil focuses on the 50SG medium-speed engine, suitable for large data center base load power supply, and has already won orders for over 1GW data centers in North America in late 2025 and early 2026, with plans to increase energy sector capacity by 35% in early 2028. Related targets Gas engines: Weichai Power (000338.SZ,02338); Marine engines: China Shipbuilding Industry Group Power (600482.SH), Weichai Heavy Machinery (000880.SZ); Gas turbines: Yantai Jereh Oilfield Services Group (002353.SZ), providing integrated solutions for power supply and thermal management for data centers in North America; Independent and controllable: Dongfang Electric Corporation (600875.SH,01072); Core components: Anhui Yingliu Electromechanical (603308.SH), Himile Mechanical Science and Technology (002595.SZ), Wedge Industrial (000534.SZ), Allied Machinery (605060.SH); Heat Recovery Steam Generators (HRSG): Pourin Special Welding Technology (001276.SZ), Xi Zi Energy Saving (002534.SZ), etc. Risk Tips Technical iteration and supply chain risks; Fluctuations in downstream demand and policy energy prices; Risks of market competition and profit deterioration.