This article summarizes the latest fundamentals of companies and industries, and does not recommend buying or selling stocks at the current time. Investing carries risks, and caution is advised.
Exploring Robotics
The underlying long-term logic of robotics: Any new technology must have a physical application. In the internet era, Apple benefited the most, connecting products (iPhone) – software algorithms (iOS) – chips (A), becoming the world’s most valuable company; in the AI era, the physical application is robotics (including smart cars and humanoid robots). Tesla has also connected Optimus – FSD – Dojo, hence the T chain and H chain robots are strategic choices.
This round of market short-term driving factors: The T chain is pinpointed, mass production is approaching + domestic leading technology companies represented by Huawei are entering the market, global resonance is starting, and the T chain and potential H chain are warming each other up, initiating a super market.
Q1: Can the robotics market be sustained?
A1: Yes, Tesla is gradually pinpointing / approaching mass production + achieving full AI control next quarter (latest statement from Musk) + Gen3 is nearing release, all act as catalysts for the sector’s sustained supply. From the perspective of other manufacturers, the domestic leading complete machine company Zhiyuan is expected to welcome new models and algorithm updates after receiving research from Lee Hsien Loong; North America is about to release two robots, Borg and ArgonOne; Shandong has established a humanoid robot center, and the Sichuan humanoid robot center will release the “Skywalker” robot in December. Domestic manufacturers are entering a period of accelerated “homework submission” in 2024, with dense catalysts; Sairisi will also organize research in early December; Another super giant, NVIDIA, is gradually preparing for robot updates for the GTC conference in March next year.
With liquidity becoming abundant again + a non-performance period and low-frequency economic data at the beginning of the year + no major pressure on the US stock market, the momentum for the robotics sector to rise steadily into the new year is assured!
Q2: What can we do if we missed the previous market?
We must wait for a pullback, but we judge that the extent and time of the pullback will not be too long, and a pullback will occur in the coming days.
If you want to allocate, we suggest focusing on core targets and speculating on new and small stocks as two strategies.
We recommend paying attention to Tesla’s humanoid robot dexterous hand key supplier Zhaowei Electromechanical and secondary supplier Fengcai Technology engaged in high-performance motor MCU (see detailed logic below). Recently, after the H chain pullback, the T chain is expected to make significant progress, and the market locks in the certainty of the T chain. Beite Technology is a core beneficiary of value and certainty premium, and Lvding Mingzhi and Sanhua Top are also beneficiaries due to this. However, we believe that for some companies, the valuation has been reached, and they should reduce holdings or have limited value, thus fully priced.
Regarding speculation on new and small stocks, due to the large number of targets and compliance reasons, we will not elaborate further, but please see the investment suggestions below.
Q3: What do you think of Zhaowei Electromechanical and Fengcai Technology?
Zhaowei Electromechanical:
1) Since reaching a market value of 10 billion, we have continued to firmly and highly recommend the company. There is a significant expectation gap in the humanoid robot field, and we are optimistic about the company’s positioning in the T+H+F supply chain and its technical level, as well as its future volume level for dexterous hand products and joint modules; 2) Regarding the T chain pinpoint and whether to use hollow cup or brushless slotless, there is currently no conclusion. The company has communicated with major clients in North America after the Thanksgiving holiday regarding this matter. The company’s hollow cup and brushless slotless motors both have world-class standards. The final selection depends on the client’s balance of torque and efficiency, but we believe the company will not be absent. 3) The valuation has not yet reached the mass production level of 2030; other Tier 1 manufacturers’ valuations have reached the 2030 level, while Zhaowei’s valuation is currently at the 2026-2027 level, indicating an expectation gap. Currently, it has broken through the short-sellers’ bottleneck (reduction and MR short sales have been cleared), maintaining a valuation of 12 billion for the main business, and the robotics business is expected to add 1 million units x cost reduction post-ASP of 10,000 yuan x conservative 1/4 share = 2.5 billion in revenue (about 500 million profit, at 24 times PE, it would be a 12.5 billion valuation). Overall, we see Zhaowei’s valuation at 23-25 billion yuan.
Fengcai Technology:
1) The reason we did not previously recommend it highly was due to reduction and unresolved downstream export exposure risks; 2) The core logic of our current recommendation is that the market was once entangled in hollow cup or brushless slotless, or entangled in MZ or ZW, Fengcai, as a seller, is a supplier to both companies, and the investment logic is relatively straightforward; 3) Under the dominance of bulls, some reductions have been digested, and strong PMI and export orders indicate strong resilience in downstream exports, ensuring high growth in annual performance without significant previous price increases; 4) We predict that the company’s net profit attributable to the parent in 2025 is expected to reach 350 million yuan, while the current market value corresponds to only 40 times PE. The company’s historical valuation TTM center is above 60 times PE, conservatively still has 30%-40% space for growth.
Q4: Any other investment suggestions?
We recommend paying attention to the following investment main lines:
T chain recommendations: Mingzhi Electric (dexterous hand motor), Sanhua Intelligent Control, Top Group, Beite Technology, Lvding Harmonics; Attention: Zhaowei Electromechanical (dexterous hand motor), Hanwei Technology (tactile sensors), Shuanglin Co., Ltd.
HW chain recommendations: Zhongjian Technology, Hechuan Technology, Keli Sensor; Attention: Zhaowei Electromechanical, Tuosida, Aifute, etc.
Zhaomin Technology’s limit-up commentary
Related to robotics
Tier 2, expected to obtain the first batch of T robot pinpoint, high certainty, supply motor stator + casing, current supply ASP 2500-3000 yuan;
Has already knocked out other Tier 2 competitors, waiting for T drawings to freeze, and enter pinpoint;
Main business
The company’s main business is special engineering plastics (precision injection molded parts), raw materials involve PEEK, LCP, PA, etc. Previously a Japanese-funded enterprise, now 100% controlled, with main competitors being foreign-funded, currently single vehicle ASP around 200 yuan, future target 600-800 yuan;
2024 customer structure = Sanhua 18% + Pierburg 9% + Leydon 8% + Top 6% + Geely 5% + Cummins 5%, with expectations for Sanhua, Top, and Cummins to increase their shares;
2024 product structure = New energy vehicles 43% + fuel vehicles 37% + home appliances 12% + commercial vehicles 8%, with expectations for the share of new energy vehicles to continue to rise (to 50%+, benefiting from β), while the share of fuel vehicles will decline, and commercial vehicles & home appliances will remain basically stable.
Forecast and Outlook
Fundamentally, profits are expected to be 160 million / 210 million yuan in 2024/2025, benefiting from ① new energy vehicle β; ② continuous increase in share of Sanhua and Top and client self-identification; ③ single vehicle value has another 4 times space;
On the valuation side, 2025 performance is expected to grow about 30%, and as the new energy vehicle business releases, ROE will gradually recover to above 15% or even higher. The valuation of traditional business can exceed 20X, corresponding to a market value of over 4.2 billion +;
For robotics, assuming 2500 yuan * 1 million units * 20% net profit margin = 500 million yuan * 50% share (simple assumption) * 30 times (in fact, reference to other robot valuations is mostly above 50X) = 7.5 billion;
That’s all for today. If you’re interested, click the link at the end of the article to read the original text. Join the community for more investment strategies, tutorials, and tools waiting for you.
