中国自动化：脱离困境

EquitiesAutomation Out of the woods China ◆We expectChina’s industrial automation market to resumegrowth in 2026-27 Corey Chan* (Reg. No. S1700518100001)Head, A-share Industrials & Renewables ResearchHSBC Qianhai Securities Limitedcorey.chan@hsbcqh.com.cn+86 21 5066 2001 ◆We expect factory automation tooutperformprocessautomationin the upcycle Amy Hu* (Reg. No. S1700520090001)Analyst, A-share Industrials & Renewables ResearchHSBC Qianhai Securities Limitedruo.lin.hu@hsbcqh.com.cn+86 755 8898 3408 ◆UpgradeInovancetoBuy(fromHold),downgradeSupcon toHold (from Buy), andmaintain Hold on Estun; changeTPs for all Echo Zhang* (Reg. No. S1700525050001)Analyst,A-share Industrials & Renewables ResearchHSBC Qianhai Securities Limitedecho.x.zhang@hsbcqh.com.cn+86 10 5795 2314 We expect China’s industrial automation market toresumegrowth in 2026-27.We see major capex turnarounds in key discrete industriessuch asPCB, consumerelectronics, auto & auto parts, and LIB, driven by downstream product iterationsand rising factory utilisation.We maintain our 2025and2026 industrial automationmarket growth forecast at 0%and2%,respectively,and introduce our 2027 growthforecast at 3% to reflect our positive outlookonthe industrial automation marketgiven the domestic expansion cycle and the expansion of Chinese companies intheoverseas markets. * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulations Factory automation should fare better than process automation in the upcycle.This is due to the early-cycle nature of the former and overcapacity of the latter.Weexpect7% growthfor China’sfactory automation marketin 2026, comparedwith a1% decline for China’sprocess automation marketduringthe same period. Inovanceis our preferred pickgiven its market leadership in factory automation.For Inovance(upgrade to Buyfrom Hold;raiseTPto RMB96.00from RMB72.00),weraise our 2026-27 earnings estimate by 2-3%as we raise our 2026-27e revenueforecasts by 1-2% to reflect the company’s expansion in new product categories.ForSupcon(downgrade to Holdfrom Buy;cutTPto RMB58.00from RMB68.00),we lowerour 2025-26 earnings estimatesby 39-44% to reflect a weaker capex outlook for theprocess industries.For Estun(maintain Hold,raiseTPtoRMB23.70fromRMB17.90),wecut our2025-26earnings estimates by22-46% to reflectthekeenprice competitionintheindustrial robotmarket.Seepage7for fullvaluations and risks. HSBC Global Research Podcasts This is our latest report on the Automation theme. If you want to subscribe toanyof our nine big themes,click here. Issuer of report:HSBC Qianhai Securities LimitedView HSBC Qianhai Securities at:https://www.research.hsbc.com Disclosures & DisclaimerThis report must be read with thedisclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Investment summary We expect China’s industrial automation market to resumegrowth in 2026-27, after twoyears ofdownturn(Exhibit2).While the overallindustrial automationmarket performance isstilllacklustre(+1% in 1H25), the factory automation market, an early-cycle segment of theoverall market, registered saw 2% growth in 1H25 (vs.-5% in 2024).We see major capexturnarounds inkey discrete industriessuch asPCB, consumer electronics, auto & auto parts,and LIB (Exhibit7).Metal-cutting machine orders,a leading indicator, also show positive trends,withtheorder of metal-cutting machine tools from Japanup18% y-o-y in7M25(Exhibit3).Domesticmetal-cuttingmachine tool productiongrowth also accelerated from 10% y-o-y in 2024to15% y-o-y in8M25(Exhibit4).We maintain our 2025/2026 industrial automation marketgrowth forecast at 0%/2%, andintroduceour2027 growth forecastat3% to reflect ourpositiveoutlookontheindustrial automationmarketgiven the domestic expansion cycle and theexpansions of Chinese companies intheoverseas markets. However, the recovery is unlikely to be a universal one.The factory automation market, anearly-cycle part of the overall market, should perform much better than the process automationmarket, which hasonlystarted its capex contraction cyclein the last fewmonths. In 2Q25, thefactory automation market sales rose 0.5% y-o-y while the process automation market saleswas down 2.7% y-o-y(Exhibit6). We expect the trend to continue for the nexttwoyears. Weexpect the process automation market to witness a 1% sales decline per annum in 2025and in2026, given the overcapacity in the process industries.Comparatively,the factory automationmarketcouldsee7% growth in 2026,up from 2%growthin 2025,on rising utilisation for thediscrete industriessuch asLIB, 3C, and PCB,in our view. Inovanceis our preferredpick.The companyis the largest domestic factory automationplayer in China, in terms of 2024 sales.We expecta 22% earnings CAGRover2024-27egiventhe tailwindsin the factory automation market.LIB and 3C,two of the largest downstreammarketsfor the company, together accounted for