Core Viewpoint - The mechanical equipment industry has shown improvement in its fundamentals, but the trading landscape is differentiated, limiting the potential for pure valuation increases [3]. 2025 Mechanical Industry Review - Based on financial data and trading data from the first three quarters of 2025, the mechanical equipment industry has been reviewed, indicating a general improvement in the industry's fundamentals [3]. 2026 Industry Outlook - The "Mechanical Industry Steady Growth Work Plan (2025-2026)" sets an annual revenue growth target of 3.5% for the industry. The China Machinery Industry Federation predicts a stable operational trend for the mechanical industry in 2026, with an expected growth rate of 5.5% for major indicators. It is anticipated that the actual growth may exceed both the steady growth work plan and the federation's forecast due to favorable conditions for listed companies in terms of scale, brand, talent, and capital [4]. - Real estate investment pressures are not expected to significantly negatively impact the mechanical industry, while new infrastructure investments are expected to drive growth in related equipment. High-margin external demand is expected to continue driving the industry to expand internationally. Technological research and capital operations are expected to drive industrial upgrades [4]. 2026 Investment Recommendations - **Technology Innovation Directions**: Favorable on the AI industry chain and commercial aerospace industry chain. Specific recommendations for the AI industry chain include: 1) embodied intelligent robotics industry chain; 2) PCB equipment industry chain benefiting from the explosion of AI demand; 3) power supply, heat dissipation, cooling sources, and power supply equipment and components in the data center industry chain. For the commercial aerospace industry, recommended directions include: 1) suppliers of rocket and satellite bearings, aerospace forgings, and other components; 2) supporting equipment such as metal additive printing and metal processing machine tools [5]. - **Globalization Direction**: Favorable on intelligent warehousing logistics equipment and engineering machinery [5]. - **Energy Security Direction**: Favorable on mining equipment, oil and gas equipment, and nuclear power equipment [5]. - **M&A Direction**: Based on potential M&A opportunities, a small-cap M&A portfolio for the mechanical industry has been constructed [5].