EB SECURITIES: Shanghai Electric Group (02727) continues to make breakthroughs in emerging industries such as 25 years of nuclear fusion and Siasun Robot & Automation. We maintain a "buy" rating.

EB SECURITIES released a research report stating that it maintains a "buy" rating on Shanghai Electric Group (601727.SH, 02727). The company's coal and electricity new order scale has slowed down, and pressures such as asset impairment have to some extent affected the company's performance. With caution, earnings forecasts have been lowered, and it is expected that the company's net profit attributable to shareholders for the years 2026-2028 will be 15/24/29 billion yuan (down 44%/down 27%/added), with the current A/H share price corresponding to a PE ratio of 83/35 times for 2026. Against the background of China's energy structure transformation and industrial structure adjustment, the company is expected to use its leading position to further increase its market share in traditional advantageous businesses. Meanwhile, with the support of the company's technological research and development advantages, new business areas such as nuclear fusion/fourth-generation reactors, hydrogen energy, and Siasun Robot & Automation are also expected to become new growth points for the company. EB SECURITIES' main points are as follows: Events The company published its annual report for the year 2025, with operating revenue of 126.679 billion yuan, a year-on-year increase of 9.03%, and net profit attributable to shareholders of 12.06 billion yuan, a year-on-year increase of 60.3%; in the fourth quarter of 2025, operating revenue was 44.402 billion yuan, a year-on-year increase of 12.15%, achieving a net profit attributable to shareholders of 1.41 billion yuan, turning losses around year-on-year, but a decrease of 42.42% quarter-on-quarter; it plans to distribute cash dividends of 0.1425 yuan (tax included) per 10 shares. Energy equipment income scale remains high, industrial equipment and integrated services operations are stable In 2025, the company continued to focus on the main business of high-end equipment manufacturing, with the following performances in various businesses: (1) The energy equipment sector performed well, driven by the continuous growth of revenue from coal-fired power generation, with operating revenue increasing by 21.48% year-on-year to 75.024 billion yuan. However, the income growth of the wind power business with a relatively low gross profit margin also impacted the sector's profitability to a certain extent, with the gross profit margin decreasing by 1.25 percentage points year-on-year to 18.44%; (2) The elevator business in the industrial equipment sector was affected by the real estate industry, leading to a slight decline in revenue scale, with operating revenue decreasing by 1.49% year-on-year to 38.074 billion yuan, and the gross profit margin decreasing by 0.47 percentage points year-on-year to 16.22%; (3) The integrated services business operations were stable, with operating revenue decreasing by 0.41% year-on-year to 20.649 billion yuan, and the gross profit margin decreasing by 2.56 percentage points year-on-year to 11.12%. Continuous innovation in new order scale, wind power and nuclear power sectors perform well In 2025, the company's new orders increased by 12.5% to 172.8 billion yuan, reaching a new high in nearly 5 years. The order scale of the three major sectors all increased, with the energy equipment sector experiencing a slight slowdown in order growth, mainly due to the slowdown in new orders for coal-fired power (down 18.5% year-on-year to 26.59 billion yuan). However, the wind power/nuclear power sectors performed well, with new orders increasing by 32.2%/25.3% year-on-year to 22.97/9.89 billion yuan respectively; industrial equipment new orders increased by 5.2% year-on-year to 44.48 billion yuan, maintaining stability; integrated services new orders increased by 62.9% year-on-year to 36.19 billion yuan, which is expected to provide strong support for the company's revenue growth in the future. Continuously focus on the breakthrough progress of the company in emerging industries such as nuclear fusion, Siasun Robot & Automation The company continues to promote the development of strategic emerging industries and future industries. In the field of nuclear fusion, the company is deeply involved in the national fusion key projects, has successfully delivered the world's first ITER project magnet cold state test Duwa and CRAFT project TF coil box, and will deliver core components of several host systems in the future. In the fourth-generation reactor field, the company has achieved a breakthrough in the high-temperature gas-cooled reactor nuclear island equipment pressure vessel, internal components of the reactor, and the first set of large forgings for steam generator. In the Siasun Robot & Automation field, the company has released its first self-developed humanoid Siasun Robot & Automation "Su Yuan", and through the "independent research and development + ecological cooperation" dual-wheel drive, it has preliminarily constructed an industrial chain covering industrial Siasun Robot & Automation, special Siasun Robot & Automation, and intelligent Siasun Robot & Automation in various sub-fields. Risk Warning: Rising raw material prices leading to cost pressures; overseas business risks caused by geopolitical factors; risks of exchange rate fluctuations, etc.