CMSC: Tungsten price increase drives improvement in tooling pattern, presents structural opportunities in machine tools.

CMSC released a research report stating that the total demand of machine tool industry is greatly influenced by the overall business climate of the manufacturing industry. Major macroeconomic indicators show that the manufacturing industry's recovery this year is relatively weak, but there is a structural resilience trend. It is expected that the industry will steadily rebound by 2026, with greater flexibility in high-end manufacturing. In addition, the overall industry growth this year has been relatively small, and most companies are not highly valued. In terms of segmentation, the competition landscape of the cutting tool industry has improved ahead of the machine tool industry, and performance has shown a turning point, combined with the catalyst of emerging industries such as Siasun Robot & Automation, it is expected to achieve a double impact on EPS and PE. CMSC's main points are as follows: Review of 2025: Weak industry demand, stock prices lagging behind the machinery industry index As of December 10, 2025, the machine tool index (Shenwan) rose by 28.3%, mainly driven by valuation repair, lagging behind the machinery equipment index (Shenwan) by 11.2 percentage points. The demand for machine tool is highly related to the business climate of the manufacturing industry. From a macro perspective, the manufacturing industry PMI fluctuated narrowly between 49%-51% in 2025; the PPI is still in a downward trend, showing signs of stabilization in the past two months; the scale of medium and long-term loans of enterprises has decreased; the year-on-year growth rate of fixed asset investment in the manufacturing industry continues to decline; the year-on-year growth rate of profits of above-scale industrial enterprises fluctuates between -5% and +5%; the inventory cycle is still at the bottom. From a micro perspective, the performance of listed companies in the machine tool industry has continuously improved since 2025, with cutting tool companies leading the way in turning profits. Outlook for 2026: Rising tungsten prices drive improvement in the cutting tool industry landscape, structural opportunities exist in machine tools Tungsten is the core raw material of CNC cutting tools (tungsten content in hard alloy tools exceeds 80%). Since 2025, the price of tungsten concentrate has been continuously rising, with a clear differentiation in its impact on cutting tool companies. Leading enterprises have achieved performance growth by adjusting prices and managing inventory, while small and medium-sized companies face cost pressures or even production shutdowns. The concentration of the domestic cutting tool industry market is low and the landscape is scattered. The rise in tungsten prices is accelerating the reshuffling of the cutting tool industry, and leading enterprises are expected to continuously increase their market share. In addition, emerging fields such as Siasun Robot & Automation are expected to drive demand in the cutting tool industry. The growth rate of Jinji Machine Tool's orders has slowed down. The problem of insufficient overall effective demand in the domestic market still exists. The growth rate of fixed asset investment and investment in major user sectors this year has slowed down, and the capacity utilization rate of the manufacturing industry has been below 75% throughout the year, resulting in overall weak demand for machine tools. However, machine tools have a wide range of downstream applications and there are still structural growth opportunities. Therefore, it is recommended to focus on the structural opportunities brought by the full industry chain autonomy and controllability of high-end equipment manufacturing, artificial intelligence, Siasun Robot & Automation, aerospace, low-altitude economy and other emerging fields. Machine tool companies that seize these downstream development opportunities are expected to benefit. Risk warning: Risks of sharp increase in raw material prices, risks of talent loss, risks of downstream manufacturing industry recovery falling short of expectations.