on 23-Feb-2026 23 February 2026 Asia Emerging Robotics Asia Emerging Robotics: Key surprises from the 2026 Spring Festival Gala Dien Wang, Ph.D. +852 2123 2622 dien.wang@bernsteinsg.com Jay Huang, Ph.D. +852 2123 2631 jay.huang@bernsteinsg.com Weibin Liang, Ph.D. +852 2123 2666 weibin.liang@bernsteinsg.com On Feb 16, humanoid robots took center stage (video) at the 2026 Spring Festival Gala, the most-watched TV show in China. Unlike the 2025 Gala, where only Unitree's robots performed, this year featured 4 ...

Summary of Conference Call Notes Industry Overview - **Industry**: China Auto Supply Chain - **Emerging Fields**: The auto supply chain is diversifying into areas such as humanoid robotics, AI server liquid cooling, and AR/AI glasses, indicating a significant shift in focus and investment opportunities [2][5] Key Companies and Developments 1. **Kedali** - **New Application**: Expanded the application of battery structural parts from electric vehicles (EV) to AI glasses - **Pricing**: Custom-shaped battery structural parts for AI glasses command a higher price, valued at over Rmb10 per pair - **Revenue Potential**: Expected significant increase in shipments in 2026, potentially generating a few hundred million Rmb in revenue [3][5] 2. **Shuanghuan** - **Product Expansion**: Extending the application of its intelligent actuator into AR/AI glasses - **Functionality**: The actuator will be used for focusing adjustment modules, meeting requirements for both linear and rotational adjustments - **Engagement**: Currently engaging with leading AR/AI glasses manufacturers [4][5] Sector Implications - **Diversification**: The auto supply chain's diversification into emerging fields is expected to gradually yield returns as these sectors commercialize [5] Risks to the Sector - **Demand Fluctuations**: Potential dampening of demand for auto parts due to lower auto production - **Price Pressure**: Automakers may pass price pressures onto parts suppliers due to squeezed earnings from slowing car sales - **Competition**: Intensified competition could lead to price pressures - **Cost Inflation**: Rising raw material costs may increase auto part costs - **Consolidation Risks**: Worse-than-expected sector consolidation and product recalls due to quality issues are also concerns [8]

Summary of China Industrials Update Industry Overview - **Industry**: China Industrials - **Current Cycle**: The industry is in an upcycle driven by industrial upgrades and replacement cycles [6][4][3] Key Long-term Drivers - **AI Technology**: Diffusion of AI technology into intelligent manufacturing and equipment [6][4] - **Advanced Equipment Localization**: Focus on localizing advanced equipment production [6][4] - **Global Expansion**: Companies are increasingly going global [6][4] Robotics Sector - **Booming Era**: The robotics sector is entering a new booming era, with significant growth expected [6][4] - **Market Growth**: The robot industry in China is projected to double by 2028, with drones, mobile robots, and collaborative robots (cobots) leading the growth [57][66] - **Localization**: High localization rates are expected, with the ranking from high to low being drones, service robots, mobile robots, cobots, and traditional industrial robots [72][66] Subsector Insights - **Automation and Robotics**: - **Outperforming Stocks**: Inovance, Geekplus, Han's Laser, Shuanghuan, Hongfa, and Neway Valve are recommended as outperformers [6][4] - **Market Performance**: The automation market is in a mild recovery stage, with flat sales year-on-year in 9M25 compared to a decline in 2024 [26][32] - **Future Outlook**: Positive outlook for 2026-27 recovery driven by replacement demand and AI applications [27][32] - **Construction Machinery**: - **Growth Factors**: Domestic and overseas growth supported by large-scale infrastructure projects and electrification [142][138] - **Sales Performance**: Heavy-duty truck sales increased by 22% year-on-year in 10M25, but a decline is anticipated in 2026 due to front-loaded demand [143][144] - **Lithium Battery Equipment**: - **Demand Growth**: Expected growth of 54% in 2025, driven by capacity expansions and the first major replacement cycle starting in 2025 [174][181] - **Market Dynamics**: Global demand for lithium battery equipment is projected to grow at approximately 30% in 2026-27 [176][181] - **Solar Equipment**: - **Cyclical Low**: The solar equipment sector is expected to remain at a cyclical low in 2026 due to global overcapacity and single-digit growth in installations [182][186] - **Shift to Semi Equipment**: Companies are diversifying into non-solar lineups to mitigate downturns in solar demand [183][186] Financial Metrics - **Return on Equity (ROE)**: Mixed trends across subsectors, with improvements expected in automation and lithium battery equipment, while solar equipment shows erosion [19][21] - **Price-to-Earnings (P/E) Multiples**: Most subsector valuations are above the five-year median, particularly in automation and solar equipment [13][12] Conclusion - **Investment Opportunities**: The China Industrials sector presents various investment opportunities, particularly in automation, robotics, and lithium battery equipment, while caution is advised in solar equipment due to expected downturns [6][4][182]

Summary of Conference Call Transcript Industry Overview - **Industry**: China Auto Supply Chain - **Company**: Tesla Key Points and Arguments 1. **Launch of Lower-Cost Model 3/Y**: Tesla has introduced a more affordable version of its Model 3/Y SUV priced at US$36,990 and US$39,990, featuring simplified interiors and exteriors, fewer amenities, and a reduced range. Deliveries are scheduled to begin in November, with production starting at Tesla's US plant first, followed by the Shanghai plant anticipated to launch in Q126. This move aims to target price-sensitive customers [2][4][5]. 2. **Potential Suppliers for Lower-Cost Model 3/Y**: - Tuopu: Chassis parts, interiors, and thermal management parts with a potential content value per vehicle (CPV) of Rmb8,000-9,000 - Sanhua: Thermal management system supplier with a potential CPV of Rmb2,500-3,000 - Fuyao: Glass supplier with a potential CPV of Rmb800-1,000 - Shuanghuan: Supplier of transmission gears with a potential CPV of Rmb500 - Minth: Trim of side window with a potential CPV of lower than Rmb500 - Keboda: Controllers of interior lights with a potential CPV of lower than Rmb100 [3][6]. 3. **Sales Growth and Market Expansion**: Tesla reported 3Q25 deliveries of 497k vehicles, a quarterly record, representing a 29% increase quarter-over-quarter and a 7% increase year-over-year. The newly released lower-cost Model 3/Y is expected to further boost sales volume. Tesla's supply chain is expanding its client base to domestic OEMs, including traditional OEMs and EV startups [4][5]. 4. **Sector Implications**: The launch of new models is expected to act as a share price catalyst for supply chain companies in the short term. In the long term, rising content value per vehicle is anticipated to be a key growth driver for China's auto parts suppliers [5]. Important but Overlooked Content 1. **Risks to the Auto Parts Sector**: Potential risks include dampened demand for auto parts due to lower auto production, price pressure from automakers, intensified competition, higher costs due to raw material inflation, worse-than-expected sector consolidation, and product recalls due to quality issues [8]. 2. **Client Expansion**: Tesla's supply chain is actively expanding its client base to include both traditional OEMs and EV startups, which may provide additional growth drivers [4]. 3. **Content Value Growth**: The report emphasizes that the rising content value per vehicle will be crucial for the growth of auto parts suppliers in China, indicating a shift towards more integrated and higher-value components in vehicles [5].