Group 1 - The company is expected to benefit significantly from the expansion of advanced semiconductor processes in China, with orders projected to maintain over 50% growth in 2026 and entering a new market category worth billions [1] - A strategic partnership with Muxi is established, indicating the company's potential transformation into a financial AI computing platform, which could enhance its role as a hardware facilitator for the "digital RMB going abroad" initiative, thereby strengthening long-term growth prospects [1]

Core Insights - The mechanical industry is showing signs of recovery after three years of stagnation, with nominal GDP growth beginning to rise since Q4 2024, positively impacting the mechanical sector [17] - Domestic demand is weak while external demand is strong, particularly in the engineering machinery sector, where exports are gradually increasing due to improvements in the European and American markets [17][19] - The investment landscape is shifting towards overseas expansion and new industries, with a focus on automation and sectors supported by government subsidies [17][19] Industry Overview - The mechanical industry is experiencing a dual trend of weak domestic demand and strong external demand, with engineering machinery showing signs of recovery but still facing a fragile foundation [17] - Domestic investment in real estate continues to decline, with a 14.7% year-on-year drop in real estate development investment from January to October 2025, while infrastructure investment growth has also slowed significantly [19][23] - The overall investment environment is expected to stabilize as the gap between domestic and foreign demand narrows, with structural opportunities in infrastructure projects like water conservancy and high-standard farmland construction [23] 2026 Domestic Outlook - The investment gap is expected to narrow, with infrastructure investment declining from high levels and real estate investment under pressure, leading to a focus on structural opportunities [19][23] - Manufacturing investment is crucial, with the core focus on PPI and inventory levels, as domestic manufacturing orders remain sluggish [26][28] - The expectation is that PPI will improve in 2026, driven by factors such as reduced internal competition and improved domestic demand [28] 2026 Overseas Outlook - The downward trend in interest rates is a significant macro narrative, with the U.S. and Europe entering a phase of fiscal expansion, which is expected to benefit Chinese manufacturing [29][38] - The global inventory levels are at historical lows, which could lead to a new investment cycle as demand recovers [35] - The second wave of globalization for Chinese manufacturing is anticipated, driven by fiscal expansion in the U.S. and Europe, and a recovery in industrial product demand [38][40] Stock Selection Strategy - The stock selection strategy for 2026 focuses on two main themes: benefiting from overseas expansion and new industries, particularly in sectors like engineering machinery and specialized equipment [44] - Key sectors include engineering machinery, shipbuilding, and high-tech equipment, with a focus on companies that are expected to maintain stable performance and low valuations [44] - Emerging industries such as AI equipment, lithium battery production, and semiconductor manufacturing are highlighted as areas of significant opportunity [44][45] Investment Recommendations - Recommended stocks include SANY Heavy Industry, XCMG, and China Shipbuilding, which are expected to perform well in the current market environment [7] - Companies in the AI and semiconductor sectors, such as Longchuan Technology and Zhongwei Company, are also recommended due to their growth potential [7] - Future-oriented assets like humanoid robots and controllable nuclear fusion are noted as areas to watch for significant industry changes [7][45]

Investment Rating - The report maintains an "Overweight" rating for the semiconductor industry, indicating a positive outlook for the sector in the next 6 months [1]. Core Insights - Changxin Storage has initiated its IPO process, with expectations of a 50% year-on-year increase in DRAM shipments, raising its market share from 6% to 8% by Q4 [5]. - Domestic advanced process expansion is exceeding expectations, benefiting local equipment manufacturers, with new project launches anticipated in the upcoming technology iteration cycle [5]. - The report highlights the activation of the third phase of the National Big Fund, which aims to focus on critical technology breakthroughs and industry consolidation [5]. - The report recommends key players in various segments, including platform equipment manufacturers and packaging testing equipment providers, indicating a diversified investment approach [5]. Industry Trends - The semiconductor sector is experiencing a significant increase in domestic DRAM production, with Changxin Storage's market share in DDR5 expected to rise from less than 1% to 7% by year-end [5]. - The report notes ongoing advancements in mature processes, with technology iterations in nodes such as 90nm, 65nm, and 40nm driving new equipment demand [5]. - The IPO applications from domestic GPU companies signal a growing interest and investment in the semiconductor space, with substantial fundraising goals set [5].