NARI-TECH(SH:600406) Goldman Sachs·2025-05-08 04:22Investment Rating - The report maintains a "Buy" rating on Nari Tech and other domestic China opportunities, while downgrading Sungrow to "Neutral" [3][24]. Core Views - The report indicates a preference for domestic China opportunities, particularly in the grid technology sector, with a strong outlook for 2025E grid investment [2][3]. - The overall sector results for 1Q25 were largely in-line, with a median revenue change of -0% and net profit change of -6% compared to Goldman Sachs estimates [1][10]. - The report revises target prices by -14% to +13% based on 1Q25 results and forward-looking trends, rolling over the valuation base year to 2026E [1][43]. Summary by Sections 1Q25 Results Summary - 1Q25 sector results were largely in-line with 14 companies missing earnings, 13 in-line, and 5 beating expectations [1][10]. - The median gross profit margin (GPM), operating profit margin (OPM), and net profit margin (NPM) were -0.9pp, -1.7pp, and -0.5pp compared to Goldman Sachs estimates [11]. Demand Outlook - The report expects a weaker demand outlook for industrial automation in 2H25, lowering the growth expectation from flat to -4% year-on-year due to tariff impacts and uncertainties [12][16]. - Despite the challenges, a deep decline in demand is not anticipated, with government policies potentially providing support [14][20]. Domestic Opportunities - Nari Tech is highlighted as a preferred investment due to its strong growth guidance of 12% year-on-year for 2025, attributed to a robust backlog and favorable market conditions [24][46]. - The report emphasizes the potential benefits from government stimulus and the structural needs for smart grid investments in China [3][25]. AI Beneficiaries - The report continues to favor AI beneficiaries, particularly in the AI Data Centre (AIDC) space, with companies like Kstar and Envicool rated as "Buy" due to strong demand growth [2][34]. - The humanoid robot sector is also noted for its rapid R&D advancements, with companies like Sanhua being preferred for their product certainty and reasonable valuations [38][39]. Target Price Revisions - Target prices for the sector have been revised downwards by an average of -14% to +13%, reflecting the 1Q25 results and anticipated market trends [1][43].