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Morningstar | China’s largest power equipment manufacturer's growth slows as its market evolves.

Shanghai Electric Group is an industrial and manufacturing conglomerate with diverse business segments offering solutions from power generation to passenger movement. Although the company has made great efforts to extend operations into international markets in recent years, revenue generated from China still accounts for over 80% of its business as of 2017.SEG’s core business segment is power equipment, which contributes roughly half of its total operating revenue. The company is one of China's largest power equipment vendors. By providing its clients with more efficient, cleaner thermal power equipment, SEG helps its customers decrease generation costs and enhance compliance with environmental regulations. Although SEG relies heavily on its relationship with major power companies, its five largest customers account for less than 20% of its total sales, a fairly low level of concentration. In the power equipment market, SEG holds about 30% market share, competing with Dongfang Electric and Harbin Electric. In addition to thermal electric, SEG pioneered gas turbine development in China. SEG competes directly with State Grid NARI, ABB, Siemens, and Areva in power transmission and distribution.During the past three years, SEG has successfully defended its market share in thermal power plants at the expense of margin erosion. We expect this trend to continue into 2017 as China cuts back on coal-fire consumption to curb air pollution, which will likely prompts more intense competition among top equipment suppliers. In the wind energy sector, SEG has the largest offshore wind turbine market share and also targets an onshore market share leadership position.