Sinolink: Threaded rod industry focuses on profit margins, space, and potential "better than expected" opportunities in equipment.

Sinolink released a research report stating that the profit margin and growth potential of screw rods may exceed expectations. Considering the high barriers to entry in the screw rod industry, leading companies are expected to achieve high profit margins. Additionally, screw rods have wide application prospects in industrial equipment, humanoid Siasun Robot & Automation, automotive, and other fields, providing new opportunities for technological upgrades and iterations. With significant potential for growth in the screw rod industry, both screw rod companies and equipment manufacturers have promising prospects. Sinolink's main points are as follows: Profit margins for screw rods may exceed expectations The processing of screw rods involves long and complex processes, including materials, heat treatment, design, rough and finish machining, and testing, all of which require a high level of expertise. On the one hand, there are many aspects of screw rod processing that are difficult to reverse engineer. For example, using different materials to produce a screw rod without knowing the specific chemical composition of the original imported screw rod can lead to differences in performance. Even if similar materials with the same chemical composition are used, immature heat treatment processes, improper surface hardness gradients, and uneven metallographic structures can compromise screw rod performance, requiring continuous trial and error to optimize processes. On the other hand, there is a significant difference between "being able to make screw rods" and "being able to make better screw rods." Screw rods are a multi-SKU industry where companies need the capability to design for various applications. Small changes in screw rod design can result in significant performance differences, with end users placing more emphasis on dynamic characteristics and accuracy retention. Therefore, quickly establishing a closed-loop positive research and development system for "design-manufacture-testing" is crucial. Taking the leading screw rod company, UPIN in Taiwan, as a reference point, UPIN's comprehensive gross profit margins for 2021 to 2023 are expected to be 36%, 36.55%, and 31.07%, respectively (including linear guides, industrial Siasun Robot & Automation products, etc., with higher margins for ball screw rods). Similarly, leading screw rod companies in mainland China that can achieve breakthroughs are also expected to achieve higher profit margins. The growth potential for screw rods may exceed expectations According to IMARC data, the global precision ball screw rod market is estimated to be $1.6 billion in 2024, with a projected growth to $2.4 billion by 2033 at a compound annual growth rate of 4.3%. The market potential is particularly promising in fields such as healthcare, aerospace, and semiconductors. In addition to these areas, there is significant growth potential in the industrial equipment, humanoid Siasun Robot & Automation, and automotive sectors. Industrial Equipment: Screw rods, paired with linear guides, are crucial components for the transmission and positioning of industrial equipment. According to calculations, the market space for screw rods and linear guides in Chinese industrial equipment in 2023 was RMB 18.16 billion. Based on announcements from Qinchuan Machine Tool & Tool Group Share, UPIN in Taiwan, and Yintai Technology have a market share of nearly 50%, while NSK and THK from Japan have a market share of about 15%. Chinese mainland companies have a market share of only about 25%, indicating significant room for growth in import substitution. Humanoid Siasun Robot & Automation: Since Tesla released the "Optimus" humanoid Siasun Robot & Automation and adopted planetary ball screw rods as linear actuators, the application of screw rods in humanoid Siasun Robot & Automation has matured. Several companies have introduced solutions using screw rods as linear actuators for arms, legs, and dexterous hands, with promising application prospects. According to estimates, assuming an average of 10 planetary ball screw rods per humanoid Siasun Robot & Automation unit at an average price of RMB 800 per rod, the potential market space could reach RMB 8 billion when a million units of humanoid Siasun Robot & Automation are shipped, demonstrating explosive growth potential. Automotive: Level 3 and above intelligent driving systems have further increased the demands on chassis components. Linear actuators consisting of motors, screw rods, and sensors have good application prospects in scenarios such as steer-by-wire, brake-by-wire, active suspension, requiring intelligence and faster response times. For example, Schaeffler's innovative rear-wheel steering system currently uses planetary ball screw rods, with a compact structure, light weight, quiet operation, and easy integration into vehicles. Some domestic screw rod companies have already completed the development of automotive screw rod products, and 2025 is expected to see an increase in automotive screw rod production, indicating greater growth potential in the future. The importance of screw rod equipment may exceed expectations With significant growth potential in the screw rod industry, equipment manufacturers, as "shovel sellers," have a strong demand certainty. Considering the strong cost reduction demands in downstream areas like humanoid Siasun Robot & Automation and automotive, there are new opportunities for technological upgrades and iterations in the equipment industry. It is recommended to focus on opportunities brought by new technologies, such as cost reduction through grinding replacement with milling, leading to demand for hard turning machines, milling machines, and super-hard cutting tools. Additionally, focusing on flexible areas such as thread grinding machines is advised. According to calculations, a shipment of a million units of humanoid Siasun Robot & Automation corresponds to a market space of RMB 4.4 billion to RMB 8.9 billion for thread grinding machines. If domestic companies can achieve breakthroughs in domestic substitution, there is significant growth elasticity. Investment recommendations Investors are advised to focus on Wuxi Best Precision Machinery (300580.SZ), Jiangsu Hengli Hydraulic (601100.SH), and Qinchuan Machine Tool & Tool Group Share (000837.SZ). Risk warning: Progress in domestic substitution may not meet expectations, and the industrialization progress of humanoid Siasun Robot & Automation may not meet expectations.