China Securities Co., Ltd.: General equipment sector shows signs of recovery in Q1 2026, recommending high-growth sectors such as gas turbines.

China Securities Co., Ltd. released a research report stating that after experiencing a downturn for 5 years, there are signs of recovery in the general equipment sector in 2026Q1, with orders continuing to improve. In the specialized equipment sector, demand driven by AI capital expenditure and reshaping of the global energy landscape is the strongest. Recommended sectors include high-quota gas turbines, semiconductor equipment, PCB equipment, industrial control and machine tool equipment with improving fundamentals, as well as engineering machinery and ships with sustained cyclical uptrends. China Securities Co., Ltd.'s main points are as follows: AIDC power generation equipment: revenue and net profit attributable to shareholders are growing rapidly, and the outlook remains positive. There is a shortage of gas turbine production capacity, and equipment demand is driving growth in the domestic gas turbine industry chain performance with some differences among related companies. The industry chain price increases are continuing, and the trend towards overseas production by domestic manufacturers is clear. Recently, there have been frequent orders for domestic gas turbines to go overseas, represented by companies such as Dongfang Electric Corporation, AECC Aviation Power, and China Shipbuilding Industry Group Power. The industry chain price increases are also continuing, with gas turbine prices and Jeely Cheng leverage orders continuing to rise, and profitability is expected to further improve. According to our calculations, by 2028, the demand for power generation in North America driven by AI will exceed 100 GW, with gas turbine demand estimated to stabilize around 50 GW in other fields, while global gas turbine supply is expected to be less than 100 GW by then, creating a huge shortfall. Therefore, the gas turbine industry chain is expected to be fully scheduled until after 2030, and price increases are inevitable, while overseas demand also needs to be taken seriously. Humanoid Siasun Robot & Automation: Current performance contribution is relatively limited, keep an eye on OptimusV3 progress and domestic manufacturers' IPO progress 2025 is the year when humanoid Siasun Robot & Automation started mass production, with leading players achieving shipments in the thousands, and most supply chain companies are still in the early stages of receiving small orders or samples, so the industry's demand for related companies' performance during the current period is relatively limited. Tesla's OptimusV3 is expected to approach mass production by mid-year and be officially mass-produced at the Fremont factory at the end of July to early August. In 2026, Siasun Robot & Automation's performance and finishing score in the semi-marathon are expected to significantly improve; at the same time, the proportion of autonomous navigation teams has significantly increased, reflecting Siasun Robot & Automation's ability to run through intelligent "perception-decision-control" loops, which will help in adapting to more application scenarios in the future. The Optimus V3 is currently in a continuous preheating phase, and subsequent product releases and mass production progress are worth paying attention to. Domestic Siasun Robot & Automation companies such as Yushu Technology are continuing to push forward with IPOs, with a significant position in the industry chain and prominent brand strength of domestic entities, which may lead to a reevaluation of valuation for domestic entity manufacturers, and we recommend paying attention to related domestic supply chains. Semiconductor equipment: The trend of large-scale expansion downstream is becoming more apparent, and the trend of autonomy and controllability is constantly strengthening In the post-2025 period, semiconductor equipment benefits from the growth in AI computing power demand, with overseas leading companies experiencing longer lead times in equipment such as testing machines, resulting in double benefits from increased demand and market share in the downstream sector. The revenue of front-end equipment has maintained good growth, but due to a significant increase in research and development expenses, the profit growth rate is lower than the revenue growth rate, and the components segment of the industry chain faced obvious pressure on performance in 2025 due to a slowdown in downstream capital expenditure growth, along with fierce price competition among components companies, and slow progress in the production of some "bottleneck" components, which also had an impact on costs, resulting in lower growth than the average for the semiconductor equipment sector. After the first quarter of 2026, the outlook for high-growth downstream equipment remains positive, with a clear recovery in front-end growth rates, although components are under pressure from previous depreciation and high research and development spending, but there have been signs of improvement in order volumes, with a possible rebound in the future. Key areas to focus on include: (1) Flexible direction for expanding storage capacity: Advanced Micro-Fabrication Equipment Inc. China, Shenzhen SEICHI Technologies, Jiangsu Leadmicro Nano Technology; (2) Replacement of Japanese equipment: Track links, Shenzhen SEICHI Technologies, Beijing Huafeng Test & Control Technology, etc.; (3) Component direction: Shanghai Gentech, Mloptic Corp., Shenyang Fortune Precision Equipment, Sprint Precision Technologies, Kunshan Kinglai Hygienic Materials, etc. Construction machinery: Exchange rate fluctuations affect performance, operational profitability remains strong Domestic and international demand growth in 2025 drove high profitability resulting in a 12% year-on-year increase in revenue in the construction machinery sector. Both domestic and overseas markets showed signs of recovery, with profit growth even higher at 20%, mainly due to the increased proportion of higher-profit overseas market revenues and the active promotion of high-quality development and state-owned enterprise reform by relevant companies. In the first quarter of 2026, internal and external demand is maintained, profits were negatively impacted by exchange rate fluctuations in the short term, but operational profitability showed good growth. In the first quarter of 2026, revenue in the construction machinery sector increased by 13% year-on-year compared to 2025, with internal and external demand continuing to improve, while profits were down by 4% year-on-year, primarily due to the appreciation of the RMB against the USD and other currencies, resulting in exchange rate losses, whereas there were gains from exchange rates in the same period last year. Excluding this factor, operational profitability showed good performance. Recent high-frequency data performance exceeded expectations, with excavator prices rising and the sector in a good position. Key recommendations include: Sany Heavy Industry, Jiangsu Hengli Hydraulic, XCMG Construction Machinery, Zoomlion, Guangxi Liugong Machinery, Shantui Construction Machinery, Hangcha Group, Anhui Heli Co. Ltd., Zhejiang Dingli Machinery, etc. Ships: Sector performance continues to grow rapidly, optimistic about the sector's future market In 2025, shipbuilding companies achieved operating income of RMB 251.964 billion, an increase of 68.0% year-on-year, and net profit attributable to shareholders of RMB 12.812 billion, an increase of 141.5% year-on-year. In the first quarter of 2026, operating income reached RMB 70.746 billion, a year-on-year increase of 122.0%, with net profit attributable to shareholders at RMB 6.91 billion, a year-on-year increase of 309.8%, showing even faster profit growth and continuous improvement in profitability. The shipbuilding industry is currently in an upward cycle lasting for a decade, with existing capacity being replaced and updated due to stricter environmental policies, providing core support for the industry. Due to external factors, there are variations in the prosperity of different types of ships and the rotational pace differs. Currently, oil transportation prices are high, stimulating a wave of new orders for oil tankers, with new orders for tankers maintaining a high level since November 2025 for 6 consecutive months, and the tanker market is expected to remain strong throughout the year; looking ahead, bulk carrier orders may become the next mainline theme. The new shipbuilding cost index increased steadily on a weekly basis in April, and orders from major mainstream shipyards have been locked in until 20292030, indicating a tight supply-demand situation. We are optimistic about the sector's future market. Key recommendations include China CSSC, China Shipbuilding Industry Group Power, etc. Key recommendations for the mechanical sector: China Shipbuilding Industry Group Power, China International Marine Containers, Kunshan Dongwei Technology, Yantai Jereh Oilfield Services Group, China CSSC, Jiangsu Hengli Hydraulic, Obi-Zhongli, Sany Heavy Industry, Himille Mechanical Science and Technology, Hefei I-TEK Opto-Electronics, Advanced Micro-Fabrication Equipment Inc. China, Wuxi Lead Intelligent Equipment, Pojornous Precision Industry Technology, XCMG Construction Machinery, Centre Testing International Group, Suzhou Maxwell Technologies. Related targets: Lingyi Itech. Risk analysis: Risks from fluctuations in the domestic macroeconomic environment, overseas market fluctuations, and risks of downstream expansion falling short of expectations.