Electrical EquipmentPower Automation & Motor Drives
Shandong Kehui Power Automation Co., Ltd.
山东科汇电力自动化股份有限公司
Shandong Kehui Power Automation Co., Ltd. is a China-based technology company specializing in R&D and industrialization of electrical automation, industrial IoT, high-efficiency switched reluctance motor drive systems, and behind-the-meter energy storage solutions for grid and industrial applications.
INVESTMENT RATINGB-GRADE
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EXCHANGESSE
INDUSTRY / SUB-INDUSTRYElectrical Equipment/Power Automation & Motor Drives
财务信息
2025 FY经营现金流: $8.7M
营业收入 (Revenue)$69.92M
净利润 (Net Income)$6.48M
毛利率 (Gross Margin)42.5%
净利润率 (Net Margin)9.3%
PRO RESEARCH REPORT~2860 words
EXECUTIVE SUMMARY / 研报摘要
Shandong Kehui Power Automation (688681.SH), listed on the STAR Market, is a focused player in China's power automation sector with three business segments: smart grid fault monitoring and automation, switched reluctance motor (SRM) drive systems, and behind-the-meter energy storage. In FY2025, the company reported revenue of RMB 505.5 million ($69.92 million), up 20.31% YoY, with net profit attributable to shareholders of RMB 46.88 million ($6.48 million), up 53.71% YoY. The profit growth significantly outpaced revenue growth, reflecting operating leverage and a favorable mix shift toward higher-margin products. The power system synchronization clock product saw revenue surge 66.51% to RMB 119 million, driven by domestic substitution of imported equipment. The SRM motor business grew 21.20% to RMB 156 million, supported by strong demand in forging machinery and textile applications. The energy storage business, though still small at RMB 15.66 million, grew 119.59% YoY. Kehui maintains a strong competitive position, with 84 patents (61 invention patents) and products deployed across 18 countries. Its core customers are State Grid, China Southern Power Grid, and China Railway Group. The company is well-positioned to benefit from China's '15th Five-Year Plan' grid capex cycle, with State Grid planning RMB 4 trillion in fixed asset investment, up 40% from the '14th Five-Year Plan'. We assess Kehui as a high-quality niche franchise with a narrow economic moat rooted in proprietary technology and embedded customer relationships.
1. Company Overview
Shandong Kehui Power Automation Co., Ltd. (ticker: 688681.SH) is a STAR Market-listed company headquartered in Zibo, Shandong Province, China. Founded in October 1993 and listed on the Shanghai Stock Exchange in June 2021, Kehui has built a 30+ year track record in power automation technologies. The company positions itself as a specialist in electrical automation, high-efficiency motor drive technology, and smart energy management, with a distinctive technology-first brand strategy.
The company operates through three primary business lines: (1) Smart Grid Fault Monitoring and Automation, which includes traveling wave fault location systems, power system synchronization clocks, distribution automation terminals, and cable fault detection equipment; (2) Switched Reluctance Motor (SRM) Drive Systems for industrial applications in forging, textiles, mining, and oil fields; and (3) Behind-the-Meter Energy Storage, including air/liquid-cooled storage cabinets and integrated PV-storage systems.
Kehui's products are deployed in critical national infrastructure, including 1000kV UHV transmission lines and plus/minus 1100kV DC projects. The company has received the National Technology Invention Award (Second Prize) and 16 provincial/ministerial-level awards. It holds national-level 'Specialized and New Little Giant' certification and has been recognized as a Shandong Manufacturing Champion enterprise.
2. Business Model & Core Operations
Kehui's business model is anchored in proprietary technology development with a direct sales and engineering services approach to major utility and industrial customers. The company operates on a project-based model for grid automation products, typically winning tenders from State Grid and China Southern Power Grid through centralized procurement processes, while the SRM motor business follows a more product-oriented model with recurring sales to industrial OEMs.
In FY2025, revenue composition was: Smart Grid Fault Monitoring and Automation at RMB 303 million (60.0% of total revenue), SRM Drive Systems at RMB 156 million (30.9%), Energy Storage at RMB 15.66 million (3.1%), and other businesses at approximately RMB 30.8 million (6.1%).
The Smart Grid segment includes several sub-categories with distinct growth profiles. Power system synchronization clocks generated RMB 119 million in revenue, representing 66.51% YoY growth, driven by domestic substitution of imported synchronization equipment. Transmission line traveling wave fault location products generated RMB 66.69 million, up 11.34% YoY, supported by deployment in major UHV projects including the Aba-Chengdu East 1000kV AC project and Jinshang DC project. Power cable fault detection equipment, marketed under the 'T-series' brand, remains a flagship product with strong brand recognition in the industry.
The SRM motor business achieved 21.20% YoY growth to RMB 156 million, driven by continued penetration in forging machinery and textile applications. The company successfully developed China's highest-power 710kW SRM motor and a 250kW permanent-magnet-free synchronous reluctance motor, extending its technology leadership. The company has also entered the traction motor market for rail applications and electric vessels, marking a significant expansion beyond traditional industrial applications.
The Energy Storage business, while still small, grew 119.59% YoY to RMB 15.66 million. Kehui focuses on behind-the-meter commercial and industrial storage, differentiating through its smart energy management algorithms that integrate AI for optimal dispatch and revenue maximization in electricity market environments.
3. Market Position & Competition
Kehui occupies a leading position in China's power grid fault monitoring niche. The company is one of the few domestic manufacturers capable of providing a comprehensive range of fault detection, monitoring, and location products spanning power cables, distribution lines, and transmission lines. Its traveling wave fault location products have achieved market share leadership, with deployment across all major Chinese grid regions and exports to 18 countries in 2025.
In the SRM motor space, Kehui is the domestic pioneer and market leader. The company led the drafting of China's first SRM industry standard and national standard, establishing itself as the de facto technical authority in the field. Its SRM drive systems are listed in the MIIT National Industrial Energy-Saving Technology Recommended Catalog, and the technology received the Shandong Provincial Science and Technology Progress Award (First Prize) in 2022. The company has an annual production capacity of 500,000 kW for SRM drive systems.
Key competitors in the grid automation space include Zhongyuan Huadian (300018.SZ), Zhizhen Innovation (688191.SH), and larger players like NARI Technology (600406.SH) and Xuji Electric (000400.SZ) that compete in broader segments. In fault recording and time synchronization specifically, Kehui competes primarily with Zhongyuan Huadian and several smaller specialists. Kehui's competitive positioning is differentiated by its proprietary traveling wave technology, which enables superior fault location precision compared to conventional impedance-based methods.
In the SRM motor market, competition is relatively limited given the nascent stage of the technology compared to induction and permanent magnet motors. Kehui's main competition comes from larger motor manufacturers that have begun developing SRM products, but the company maintains a significant head start with 30+ years of accumulated expertise and a comprehensive patent portfolio.
4. AI & Semiconductor Alignment
Kehui's alignment with AI and semiconductor themes is primarily through two channels: (1) AI-enabled energy storage optimization, and (2) domestic substitution of imported semiconductors in power automation equipment.
In November 2025, Kehui established Shanghai Bona Smart Energy Technology Co., Ltd., a wholly-owned subsidiary focused on AI application software development, AI theory and algorithm software development, and intelligent control system integration. This entity is expected to serve as the company's AI innovation hub for developing advanced energy management algorithms that optimize behind-the-meter storage economics in China's rapidly evolving electricity spot markets. The technical challenge here is substantial: behind-the-meter storage optimization must simultaneously account for renewable generation forecasts, real-time electricity prices, demand constraints, market trading rules, and user load variability to maximize peak-valley arbitrage, demand management, and ancillary service revenues.
On the semiconductor side, Kehui has been actively pursuing domestic substitution for critical imported components. The company completed domestic localization upgrades for its traveling wave fault location devices and satellite timing devices in 2024, replacing imported semiconductors with domestic alternatives. This is strategically important as China's power grid sector has historically relied on imported chips for protection and automation equipment. Kehui's ability to source domestically produced MCUs, power devices, and driver ICs reduces supply chain vulnerability while potentially improving cost structure over time. The company's sensor technology also benefits from advances in high-precision electronic sensors and embedded chip miniaturization, enabling integrated primary-secondary equipment designs.
5. Customer & Regional Analysis
Kehui's customer base is highly concentrated among China's major utility and infrastructure players. The primary customers for the smart grid fault monitoring and automation business are State Grid Corporation of China and China Southern Power Grid, along with their provincial subsidiaries. The company has won centralized procurement contracts across multiple provincial grid companies including Tianjin, Yunnan, Hebei North, Inner Mongolia, Liaoning, Shandong, Ningxia, Jiangsu, Hunan, and Xinjiang, with market share ranking among the top tier. China Railway Group and its subsidiaries are also significant customers for railway power automation products.
The SRM motor business serves industrial customers in forging machinery, textile machinery, mining equipment, and oil field machinery sectors. The company has successfully expanded into new applications including traction motors for rail vehicles and electric vessels.
Geographically, Kehui's revenue is predominantly domestic, with North China, East China, and Central China being the largest regional markets. International revenue remains modest at approximately RMB 14.46 million in 2024 (3.44% of total revenue), but has been growing rapidly, with cable fault testing products, transmission line monitoring equipment, and SRM motors sold across Europe, the Middle East, India, and South Africa. The company operates a light-asset overseas model, using its UK subsidiary Kehui International Limited as a regional hub for sales and distribution, supplemented by local agents and distributors. Management has indicated that international business is a strategic priority, with increased capital investment into the UK subsidiary planned for 2025.
6. Economic Moat Analysis
We assess Kehui's economic moat as Narrow, rooted in three primary sources: intangible assets (patents and proprietary technology), customer switching costs (embedded relationships with grid operators), and cost advantages (scale in niche segments).
The intangible asset moat is evidenced by the company's 84 patents, including 61 invention patents, and its role in drafting national and industry standards for SRM motors. The proprietary traveling wave fault location algorithm, developed over decades, represents a significant technological barrier that enables superior fault location precision compared to competing impedance-based methods. This technology has been validated through deployment in China's most demanding UHV transmission projects.
Customer switching costs are substantial given the mission-critical nature of grid fault monitoring equipment. Once Kehui's products are integrated into a provincial grid's automation architecture, replacing them with competitor products would require significant re-engineering and retesting. The company's multi-year relationships with State Grid and China Southern Power Grid, built through repeated successful project deliveries and service support, create a durable competitive advantage.
Scale advantages exist in the SRM motor business, where Kehui's 500,000 kW annual capacity and 30+ years of manufacturing experience provide cost and quality advantages over newer entrants. The company's products have been recognized in the MIIT National Industrial Energy-Saving Technology Recommended Catalog, creating a regulatory tailwind that reinforces adoption.
However, the moat is constrained by the relatively small scale of the company, customer concentration risk, and the project-based nature of grid automation revenue. The Narrow moat rating reflects these limitations.
7. Unique Competitive Advantages
Kehui possesses several competitive advantages that are difficult to replicate:
First, the company's unique product portfolio spanning power cable fault detection, distribution line monitoring, and transmission line fault location makes it one of very few comprehensive solution providers in the industry. This breadth enables cross-selling opportunities and positions Kehui as a single-source supplier for grid fault management needs.
Second, the T-series cable fault testing equipment enjoys exceptional brand equity, having been selected as the designated testing equipment for China Electricity Council, State Grid, China Southern Power Grid, and railway system cable skill competitions since 2008. This creates a powerful network effect as utility engineers trained on Kehui equipment naturally prefer it for procurement.
Third, the SRM motor business benefits from first-mover advantage in a market with significant growth potential. As China enforces IE4/IE5 efficiency standards, the SRM motor's inherent advantages — no rare earth materials required, high efficiency across wide speed ranges, and robust construction — position it as a compelling alternative to permanent magnet motors and induction motors.
Fourth, the company has demonstrated consistent innovation output, obtaining 14 new patents in 2026 YTD (up 100% YoY), and investing RMB 27.59 million in R&D in H1 2026, up 11.34% YoY.
8. R&D and Technological Capability
Kehui's R&D foundation is substantial for a company of its size. The company spent RMB 27.59 million on R&D in H1 2026, representing a significant portion of revenue and reflecting its technology-driven strategy. The R&D organization is distributed across subsidiaries in Jinan, Qingdao, Wuhan, and London, enabling access to diverse talent pools and proximity to key customers.
The company's core technologies include: Wide-area traveling wave fault location methods for transmission lines at 35kV and above; transient-based single-phase grounding fault line selection and protection for distribution networks; high-precision synchronization clock technology; and switched reluctance motor drive control systems. In 2024, the company's 'Intelligent Distribution Terminal with Transient Protection Function' was selected for Shandong Province's first-set complete equipment list, and its 'High-Reliability Protection Technology for Distribution Networks Adapting to High-Penetration Distributed PV' won the State Grid Science and Technology Progress Award (First Prize).
The R&D pipeline is focused on: (1) further domestic substitution of critical components and materials; (2) AI-enhanced energy management algorithms for behind-the-meter storage; (3) extending SRM motor applications to rail traction, engineering vehicles, cooling towers, and crushers; and (4) virtual power plant technology development.
China's power grid sector is entering a new super-cycle of investment. Under the '15th Five-Year Plan' (2026-2030), State Grid's fixed asset investment is projected at RMB 4 trillion, up 40% from the '14th Five-Year Plan' period. China Southern Power Grid has budgeted RMB 180 billion for 2026 alone, marking five consecutive years of record-high capex. This investment cycle is driven by multiple structural factors: the integration of renewable energy at scale, the need for UHV transmission corridors to move power from western generation centers to eastern load centers, the digitalization and automation of distribution networks, and the buildout of behind-the-meter energy storage.
The addressable market for grid fault monitoring and automation is expanding in tandem with overall grid capex. China's smart grid market is projected to reach RMB 132 billion in 2026 and approach RMB 200 billion by 2030, growing at a compound annual rate of approximately 11%. Within this, the fault monitoring segment benefits from increasing complexity of grid operations, higher reliability requirements, and the need for faster fault identification and restoration.
The SRM motor market is at an earlier stage but poised for acceleration. China's mandatory adoption of IE4 and IE5 efficiency standards for industrial motors creates a large replacement cycle opportunity. The SRM motor's advantages — no rare earth content, high efficiency, and robust construction — align well with both efficiency mandates and supply chain security priorities. Kehui's SRM products are already listed in the MIIT National Industrial Energy-Saving Technology Recommended Catalog, providing a regulatory endorsement that should facilitate broader adoption.
The behind-the-meter energy storage market in China is experiencing explosive growth, driven by falling battery costs, supportive policies, and the maturation of electricity spot markets that enable viable arbitrage economics. The key technical bottleneck is the intelligent control software that optimizes storage dispatch across multiple revenue streams, which is precisely where Kehui's AI investments are focused.
10. Investment Conclusion & Enterprise Quality
Kehui Power Automation represents a high-quality niche franchise operating in a structurally attractive industry with strong tailwinds from China's unprecedented grid investment cycle. The company's FY2025 results demonstrate the operating leverage inherent in its business model: revenue grew 20.31% while net profit surged 53.71%, as higher-margin products (particularly domestic-substitution synchronization clocks) grew faster than the overall business.
Key strengths supporting a positive quality assessment include: (1) a narrow but defensible economic moat rooted in proprietary technology and embedded utility customer relationships; (2) consistent R&D investment and patent generation, with 84 patents including 61 invention patents; (3) exposure to multiple structural growth themes — grid digitalization, UHV construction, industrial motor efficiency upgrades, and energy storage; (4) a healthy balance sheet with RMB 617.7 million in net assets as of end-2025 and no significant debt burden; (5) a shareholder-friendly capital allocation policy with a 42.74% dividend payout ratio and ongoing stock repurchase program.
Risks and areas of concern include: (1) customer concentration in State Grid, China Southern Power Grid, and China Railway Group, which creates dependence on their procurement cycles and payment terms; (2) accounts receivable risk given the long payment cycles typical of utility and infrastructure customers, with quality retention funds held for extended periods; (3) the relatively early-stage nature of the SRM motor and energy storage businesses, which have not yet achieved the scale or profitability of the core grid automation segment; (4) limited international revenue presence, which restricts the company's addressable market beyond China; and (5) the risk of intensified competition in the grid automation space as larger players such as NARI Technology and Xuji Electric focus more resources on the fault monitoring niche.
On balance, Kehui's enterprise quality is assessed as above-average for a small-cap STAR Market company. The company has demonstrated consistent execution, technology leadership in its core niche, and a clear strategic roadmap for growth. The FY2025 margin expansion trajectory, if sustained, should drive continued earnings growth even in the absence of accelerated revenue growth. The company's positioning at the intersection of grid modernization, domestic semiconductor substitution, and industrial energy efficiency provides multiple vectors for long-term value creation. We view Kehui as a compelling niche player for investors seeking exposure to China's power grid infrastructure buildout with a technology-driven differentiation story.