Soochow: General equipment demand is bottoming out, waiting for recovery in silence, exploring opportunities in segmented directions.

Soochow released a research report stating that the mid- to high-end data in general automation is in line with expectations, but the overall level of prosperity in the manufacturing industry still needs to be improved. In October-December 2024, the PMI stood above the boom-bust line for three consecutive months, showing a slight recovery in the manufacturing industry. In terms of equipment production, from January to November 2024, China's industrial Siasun Robot & Automation produced 480,000 units, an increase of 11% year-on-year. Demand was better in downstream sectors such as household appliances, electronics, and semiconductors, but weaker in sectors like lithium batteries and photovoltaics. Machine tool production reached 610,000 units, a slight increase of 1.7% year-on-year, with imported orders from Japan increasing by 33% year-on-year due to the continued depreciation of the yen and the improved cost-performance ratio of Japanese machine tools. The relative valuation levels of various sub-sectors are compared horizontally over the past five years, with machine tools, cutting tools, reducers, FA, injection molding machines, and industrial Siasun Robot & Automation in ascending order from low to high relative valuation. Industrial FA: Downstream drag from new energy eliminated, addition from 3C & semiconductor industries The 3C and semiconductor industries are expected to contribute to demand as the new energy industry declines. The FA industry aims to solve the pain points of industrial equipment manufacturers in component procurement, and the overall market demand is stable with a high ceiling, and the competitive landscape within the industry is good. In recent years, demand in the lithium battery and photovoltaic industries has weakened, while the 3C and semiconductor industries are expected to pick up the demand and continue to contribute to incremental elasticity. In the medium to long term, the market space for FB business is about three times that of the FA business, with a higher growth ceiling. Leading FA companies are expected to continue to improve their share in the BOM list at the customer end through the FB business. Injection molding machines: Recovery in domestic demand driven by 3C & household appliance capital expenditures, broad overseas market space in the medium to long term Domestic demand for injection molding machines in 2024 is good, and the leading domestic equipment manufacturers have opened up a growth ceiling. With the guidance of large-scale equipment renewal policies, domestic capital expenditures in the household appliance and 3C industries are increasing, driving a resurgence in domestic demand for injection molding machines. In terms of overseas expansion, there is a wider overseas market space for injection molding machines, and leading domestic injection molding machine providers are accelerating their entry into overseas sales channels, expanding their overseas markets to open up medium to long-term growth ceilings. Humanoid Siasun Robot & Automation: Optimus production imminent, localization of parts expected to connect the final cost reduction link Focus on investment opportunities in the body and parts companies of Siasun Robot & Automation along the T-chain and Huawei chain. Optimus from Tesla is expected to enter mass production by 2025, and the production of humanoid Siasun Robot & Automation still needs to connect the key link to reduce costs, with domestic parts manufacturers expected to benefit fully. In addition, domestic humanoid Siasun Robot & Automation companies are accelerating their expansion, announcing production plans. It is recommended to focus on investment opportunities in the body and parts companies of Siasun Robot & Automation along the T-chain and Huawei chain. Machine tools: Good domestic demand and focus on localization of whole machines & parts With Trump taking office, it is imperative to have controllable autonomy, and domestic high-end machine tools are expected to break through the trend. Trump's administration has increased the importance of the security of the machine tool industry chain. Domestic support policies have helped accelerate the localization of high-end machine tools and their parts. In addition, in the context of weak demand in the machine tool industry, the market share is becoming more concentrated among the top players. In the medium to long term, competition in the overseas machine tool market is more moderate, with a high market ceiling. As the influence in the Russian-speaking region gradually dissipates, domestic machine tool manufacturers are expected to accelerate their overseas expansion. Regarding targets For industrial FA, DongGuan YiHeDa Automation (301029.SZ) is recommended as a domestic leading company; for injection molding machines, HAITIAN INT'L (01882) and Yizumi Holdings (300415.SZ) are recommended as leading domestic companies; for humanoid Siasun Robot & Automation, Leader Harmonious Drive Systems (688017.SH) is recommended, and attention is advised to Shanghai Beite Technology (603009.SH), Zhejiang XCC Group (603667.SH), Shenzhen Zhaowei Machinery & Electronics (003021.SZ), Effort (688165.SH), and Guangdong Topstar Technology (300607.SZ); for machine tools, Wuhan Huazhong Numerical Control (300161.SZ), Ningbo Haitian Precision Machinery (601882.SH), and Neway Cnc Equipment (Suzhou) Co., Ltd(688697.SH) are recommended due to the improvement of domestic demand and controllable autonomy. Risk warning The industry's prosperity does not meet market expectations, there is a risk of core component supply disruption, and there is a risk of rising commodity prices.