MACHINERY 2026 OUTLOOK：FOCUS ON TECHNOLOGY; PAY ATTENTION TO EXPORTS AND CYCLICAL OPPORTUNITIES

We believe technological innovation-driven sectors in the machineryindustry will continue to offer investment opportunities in 2026. Despiteuncertainties over exports, we expect overseas demand to presentstructural opportunities amid companies’ efforts to expand theirinternational presence and rate cuts by the US Federal Reserve (theFed). In terms of domestic demand, we do not expect large-scaleexpansion of downstream production capacity in the near term. Amidelimination of inefficient production capacity and general-purposeequipment companies’ efforts to expand their presence in high-growthsectors, we expect share prices of related companies in the machineryindustry to rebound.

    AI infrastructure: High capex and frequent upgrades oftechnologies to create new growth opportunities for the machineryindustry. First, amid higher-than-expected overseas capex forcomputing power, demand for printed circuit board (PCB) equipment andartificial intelligence data center (AIDC) equipment is growing rapidly,driven by industry-wide production capacity expansion. We expect tightsupply in the global market to present opportunities for domesticallyproduced equipment such as drilling equipment, diesel generators, andgas turbines.

    Second, the upgrading of AI computing power is creating new demand forequipment and consumables. We think the next-generation Rubin chipswill raise requirements for the manufacturing of PCBs, cold plates, andquick connectors, and could drive the development of new technologysolutions (e.g., micro-channel liquid cooling solution). We expect the valueof related equipment and consumables to rise further.

    Humanoid robots: Development of humanoid robot sector to accelerate in 2026; pay attentionto production capacity expansion at leading companies. We think Tesla will likely start massproduction of humanoid robots in 2026 and we expect the firm’s mass production target for 2026 toexceed 0.1mn units.

    We think domestic companies such as Unitree Robotics and AgiBot are likely to launch IPOs. Weexpect the use of humanoid robots to accelerate and humanoid robot companies to step up efforts towork with companies in downstream industries. We suggest paying attention to the development ofrelated software and hardware technologies, as well as auto parts and consumer electronicscomponents suppliers’ efforts to expand their presence in the humanoid robot sector.

    Export industry chain: Focusing on sectors with global competitiveness.

    Construction machinery: We think companies’ efforts to expand their international presence andadvance corporate reforms will improve investor returns.

    Hardware tools: We expect the consumption of tools to recover amid US interest rate cuts.

    Motorcycles: We believe leading Chinese large-capacity motorcycle companies with advantages inhigh-value-for-money products will continue to gain market shares in overseas markets.

    Oilfield services equipment: We think spillover of natural gas demand from Europe could boostdemand for natural gas compressors.

    Special-purpose equipment: Subsectors with possible turnaround in business climate andtechnological advancement merit attention. Amid elimination of inefficient production capacity onthe supply side and technological innovation trends, we are optimistic about sectors making advancesin, or which have clearer directions in technologies (e.g., solid-state batteries and nuclear fusion).

    Meanwhile, we are optimistic about sectors with possible uptrends in business climate (e.g., consumerelectronics equipment and coal machinery equipment). Further, we are optimistic about sectors withturnaround in production capacity cycles, elimination of inefficient production capacity on the supplyside, and improving demand, such as the lithium-ion battery (LiB) equipment sector.

    Risks: Disappointing development of new technologies; slower-than-expected mass production;weakening of business climate in overseas markets.