Guosen: The Q3 earnings season has begun, with a focus on high-performing blue-chip stocks with strong results.

Guosen released a research report stating that amid short-term shrinking market turnover and downward oscillation, it recommends selecting targets with strong performance & reasonable valuation. On one hand, from a full-year perspective, it continues to favor investment opportunities in AI-related capital expenditure, focusing on segments with strong industry trends and good earnings expectations, and companies with good short-term positioning and expected accelerating operational improvement; on the other hand, it focuses on segment leaders with significant alpha driving improving operational trends and relatively low stock price positions. Guosen's main views are as follows: [I.] Machinery Industry Background and Outlook Independent controllability of high-end equipment: Localization of core equipment is the foundation for the independent rise of the industry. Only by breaking through the bottlenecks of core high-end equipment can downstream industries achieve true independence and industrialization; Industrial upgrading is an inevitable trend: In the era of the digital wave and energy transformation, industrial internet/AI + embodied intelligence applications continue to improve social efficiency, and new energy utilization continues to reduce social costs. China is ushering in comprehensive industrial upgrading; Export development from point to surface: With China's continuous industrial development, outstanding manufacturing enterprises in the industry have moved from import substitution to export substitution, possessing global competitiveness and accelerating export development. [II.] Research Framework: Grasping Strong Alpha Companies To better explore the business models and core competitiveness of listed companies in the machinery industry, the bank classifies machinery companies into 4 main types based on similar business models and operational characteristics: upstream core component companies, midstream specialized/general equipment companies, downstream product-oriented companies, and service-oriented companies. Upstream core component companies: Strong alpha attributes, belonging to the upstream of midstream specialized/general equipment companies, usually R&D-driven, possessing core underlying technologies, relying on technological strength or business model innovation to build high competitive barriers and form a favorable competitive landscape, giving the company certain pricing power and generally strong profitability. Through category upgrading/expansion and downstream field expansion, they continuously open up growth ceilings. Such companies are all worth watching. Midstream specialized/general equipment companies: High beta attributes, supplying products to downstream customers for industrial production. Machinery companies are generally in the midstream of the industrial chain with relatively low pricing power. Focus on companies in high-growth industries or steadily growing industries with import substitution opportunities. At the company level, focus on the company's technical strength and binding with high-quality customers. Usually industry competition is relatively fierce, and the strong get stronger. Prefer leading companies. Recommend high-prosperity industries such as new energy (photovoltaics/lithium batteries/wind power/nuclear power) and industrial automation (industrial Siasun Robot&Automation/industrial control/lasers). Downstream product-oriented companies: Products have usage functions and are directly used or operated by humans. The industry space is larger, usually with broader downstream application fields, and downstream relatively dispersed customer companies have stronger pricing power. Focus on companies in high-growth industries or steadily growing industries with import substitution opportunities. At the company level, comprehensively consider technology + products + brand + channels, prefer leading companies, and recommend sub-sectors such as cultivated diamonds and general testing and measurement instruments. Service-oriented companies: Generate revenue by providing services, usually with stable demand and good cash flow. The industry grows steadily over the long term, and leading companies have significant first-mover advantages. Prefer leaders in sub-tracks with large track space, and recommend industries such as testing services. [III.] October Investment View: Focus on High-Performing Stocks Core view: Amid short-term shrinking market turnover and downward oscillation, it recommends selecting targets with strong performance & reasonable valuation: On one hand, from a full-year perspective, it continues to favor investment opportunities in AI-related capital expenditure, focusing on segments with strong industry trends and good earnings expectations, and companies with good short-term positioning and expected accelerating operational improvement; on the other hand, it focuses on segment leaders with significant alpha driving improving operational trends and relatively low stock price positions. Technology direction: Focus on directions with high industry growth & high certainty, favor sub-sectors such as [semiconductor equipment], [AI liquid cooling and upstream equipment], [optical communication instruments & equipment], and [3D printing], and focus on [Shenzhen FRD Science & Technology (300602.SZ)], [Shanghai Hanbell Precise Machinery (002158.SZ)], [Jirfine Intelligent Equipment (301603.SZ)], [Guangdong Create Century Intelligent Equipment Group Corporation (300083.SZ)], [Gl Tech Co.,Ltd (300480.SZ)], [Sidea Semiconductor Equipment (301629.SZ)], [Uni-Trend Technology (688628.SH)], [Siglent Technologies (688112.SH)], [Opt Machine Vision Tech Co., Ltd. (688686.SH)], etc. Alpha stocks: Bottom-up, the bank prefers: good report quality & sufficient cash on books & good cash flow, with clear good performance growth or an accelerating positive trend; segment industry leading companies with significant alpha that structurally achieve steady-to-positive operational growth through market share gains, export growth, product upgrades, or category expansion. It recommends focusing on [Shanghai BOCHU Electronic Technology Corporation (688188.SH)], [Dongguan Yiheda Automation (301029.SZ)], [Centre Testing International Group (300012.SZ)], [Jiangsu Hengli Hydraulic (601100.SH)], [Yizumi Holdings (300415.SZ)], [Gem-Year Industrial (601002.SH)], etc. [IV.] In September, the machinery sector fell 8.53%, underperforming the CSI 300 Index by 2.75 pct In September, the machinery sector underperformed the CSI 300 Index by 2.75 pct. As of September 30, 2026, the machinery industry index (Shenwan classification) fell 8.53% in September, underperforming the CSI 300 Index by 2.75 pct. From an all-industry perspective, the machinery industry ranked 29th among 31 industries (Shenwan classification) in terms of September gain/loss. [V.] In September, the machinery sector valuation level continued to decline As of September 30, the machinery industry TTM P/E was approximately 41.09x, and P/B was approximately 3.21x, continuing to decline from the end of August. [VI.] In September, machinery sub-sectors fell more than they rose Based on the bank's classification of 17 machinery sub-sectors (each sub-sector weighted equally), in September 2026, machinery sub-sectors fell more than they rose, with shipbuilding & offshore engineering and elevator equipment ranking at the top, rising 1.36%/1.14% respectively. In terms of individual stock performance, the top five companies by monthly gain in September 2026 were: ShenGu Group (601091.SH)/Ceyear Technologies (301689.SZ)/Century Digital (920229.BJ)/Kaida Heavy Industry (920025.BJ)/Turnxon Precision (920298.BJ). [VII.] September manufacturing PMI was 50.10%, rebounding into expansion territory (National Bureau of Statistics data on September 30) The September manufacturing PMI was 50.1%, up 0.3 percentage points month-on-month, rebounding for two consecutive months. Historically, the manufacturing PMI remained in the prosperity range for 17 consecutive months from March 2020 to August 2021, fluctuated near the 50% boom-or-bust line since October 2021, and stayed below the boom-or-bust line for three consecutive months from October to December 2022. From January to March 2023, it returned to expansion territory, and the manufacturing prosperity level rebounded; it fell back in April-May, continued to rise slightly from June to October, remained below the boom-or-bust line from October 2023 to February 2024, stayed above the boom-or-bust line since March and April, fell below the boom-or-bust line again from May to September 2024, and starting in September, the manufacturing PMI began to rebound, returning to expansion territory from October to December. In 2025, it showed an oscillating trend. In September 2026, the prosperity level continued to rise, both production and demand remained expanding, the price index continued to rise, and the PMI for equipment manufacturing and high-tech manufacturing remained in expansion territory. [VIII.] In September, steel/copper/aluminum price indices changed +0.07%/-0.33%/-0.56% month-on-month (Wind data on September 30) In September, steel/copper/aluminum price indices changed +0.07%/-0.33%/-0.56% month-on-month. Prices of major upstream raw materials for the machinery industrysteel/copper/aluminumcontinued to rise from 2016 to mid-2021, reaching historical highs, then pulled back somewhat. Currently, copper/aluminum prices are at relatively high levels over the past five years. Since 2022, steel/copper/aluminum price indices have changed -30.02%/+49.49%/+14.18%; since 2023, steel/copper/aluminum price indices have changed -18.62%/+72.73%/+35.73%; since 2024, steel/copper/aluminum price indices have changed -18.37%/+70.92%/+37.19%; since 2025, steel/copper/aluminum price indices have changed -5.45%/+66.40%/+27.32%. [IX.] Machine tools: From January to August 2026, metal-cutting machine tool output increased 8.80% year-on-year (National Bureau of Statistics data on September 15) From January to August 2026, metal-cutting machine tool output was 584,000 units, up 8.80% year-on-year. According to National Bureau of Statistics data, from 2015 to 2025, metal-cutting machine tool output increased from 755,000 units to 868,300 units, with a CAGR of 1.41%; metal-forming machine tool output decreased from 304,000 units to 179,000 units, with a CAGR of -5.16%. In August 2026, metal-cutting machine tool output was 73,000 units, up 14.10% year-on-year, with cumulative output from January to August of 584,000 units, up 8.80% year-on-year; August metal-forming machine tool output was 16,000 units, up 8.70% year-on-year, with cumulative output from January to August of 125,000 units, up 7.80% year-on-year. [X.] Industrial Siasun Robot&Automation: From January to August 2026, output increased 29.00% year-on-year (National Bureau of Statistics data on September 15) From January to August 2026, industrial Siasun Robot&Automation output was 729,400 units, up 29.00% year-on-year. According to National Bureau of Statistics data, from 2015 to 2025, China's industrial Siasun Robot&Automation output grew from 33,000 units to 773,100 units, with a CAGR of 37.08%. In August 2026, industrial Siasun Robot&Automation output was 96,200 units, up 34.60% year-on-year; cumulative output from January to August was 729,400 units, with a year-on-year growth rate of 29.00%. [XI.] Construction machinery: From January to August 2026, excavator sales increased 24.2% year-on-year (China Construction Machinery Association data on September 8) In August 2026, 19,716 excavators were sold, up 19.3% year-on-year; sales from January to August were 191,557 units, up 24.2% year-on-year. According to statistics from the China Construction Machinery Association on major excavator manufacturers, in August 2026, 19,716 excavators of various types were sold, up 19.3% year-on-year. Among them: domestic sales were 7,986 units (including 184 electric excavators), up 3.92% year-on-year; exports were 11,730 units (including 60 electric excavators), up 32.7% year-on-year. From January to August 2026, a total of 191,557 excavators were sold, up 24.2% year-on-year. Among them: domestic sales were 94,619 units (including 411 electric excavators), up 17.4% year-on-year; exports were 96,938 units (including 257 electric excavators), up 31.8% year-on-year. Loaders: August sales were 10,832 units, up 14.7% year-on-year; sales from January to August were 104,658 units, up 25.8% year-on-year. According to statistics from the China Construction Machinery Association on major loader manufacturers, in August 2026, 10,832 loaders of various types were sold, up 14.7% year-on-year. Among them: domestic sales were 5,421 units (including 3,056 electric loaders), up 13.6% year-on-year; exports were 5,411 units (including 476 electric loaders), up 16% year-on-year. From January to August 2026, a total of 104,658 loaders of various types were sold, up 25.8% year-on-year. Among them: domestic sales were 52,587 units (including 30,480 electric loaders), up 17% year-on-year; exports were 52,071 units (including 2,575 electric loaders), up 36.1% year-on-year. [Investment Recommendations] AI infrastructure: Liquid cooling equipment - Guangdong Create Century Intelligent Equipment Group Corporation (300083.SZ), Jirfine Intelligent Equipment (301603.SZ), Neway Cnc Equipment (Suzhou) Co., Ltd (688697.SH); Optical communication instruments & equipment - Uni-Trend Technology (688628.SH), Siglent Technologies (688112.SH), Rigol Technologies (688337.SH), Opt Machine Vision Tech Co., Ltd. (688686.SH), Unicomp Technology (688531.SH); Refrigeration & liquid cooling - Shenzhen FRD Science & Technology (300602.SZ), Guangdong Shenling Environmental Systems (301018.SZ), Lens Technology (300433.SZ); Gas turbines - Yantai Jereh Oilfield Services Group (002353.SZ), Wedge Industrial (000534.SZ), Anhui Yingliu Electromechanical (603308.SH). Semiconductor equipment: Wuhan Jingce Electronic Group (300567.SZ), Sidea Semiconductor Equipment (301629.SZ), MaxOne Semiconductor (688809.SH), Shanghai Hanbell Precise Machinery (002158.SZ), Shenzhen SEICHI Technologies (688627.SH). Alpha stocks: Shenzhen Inovance Technology (300124.SZ), Jiangsu Hengli Hydraulic (601100.SH), Shanghai BOCHU Electronic Technology Corporation (688188.SH), Dongguan Yiheda Automation (301029.SZ), Centre Testing International Group (300012.SZ), GRG Metrology & Test Group (002967.SZ), Yizumi Holdings (300415.SZ), iRay Group (688301.SH), Himile Mechanical Science and Technology (002595.SZ). Humanoid Siasun Robot&Automation: Jiangsu Hengli Hydraulic (601100.SH), Shenzhen FRD Science & Technology (300602.SZ), Shenzhen Inovance Technology (300124.SZ), Lens Technology (300433.SZ), Leader Harmonious Drive Systems (688017.SH).