January 28, 2026 05:10 PM GMT China Industrials | Asia Pacific Humanoid Supply Chain Trip Takeaways: The Emerging Gap We see a widening gap between leaders and laggards, for both integrators and suppliers, and expect the gap to be amplified upon entering mass production. We prefer leading component suppliers – Leaderdrive and Hengli. Key Takeaways During our China Humanoid Supply Chain Trip on January 26-28, we met with both integrators (Fourier, Kepler, MagicBot), and component suppliers (Leaderdrive, Heng ...

Summary of Leader Drive (688017.SS) Conference Call Company Overview - **Company Name**: Leader Drive (LD) - **Industry**: Robotics and Automation - **Specialization**: Production and sale of precision reducers, including harmonic reducers and mechatronic actuators for various sectors such as industrial robots, service robots, CNC machine tools, aerospace, and medical equipment [22][23] Key Points and Arguments Humanoid Robot Market Potential - **Market Position**: Leader Drive is positioned as a key beneficiary in the humanoid robot and physical AI era, with expectations of mass production and commercialization of humanoid robots [1] - **Growth Forecast**: Management indicated that humanoid robot shipments could at least double in 2026, leading to a significant increase in revenue contribution from humanoid robots, projected to rise from approximately 20% in 9M25 to 40-50% in 2026 [4][1] Financial Performance and Projections - **Earnings Forecast**: For 4Q25E, Leader Drive is expected to report a net profit of Rmb27 million, an increase of 11.2 times year-over-year from a net loss of Rmb3 million in 4Q24, driven by humanoid robot contributions and market share gains in industrial robots [3] - **Revised Earnings Estimates**: Earnings forecasts for 2025, 2026, and 2027 have been raised by 1%, 1%, and 2% respectively, reflecting a more positive outlook on the humanoid robot business [1] - **Target Price Adjustment**: The target price has been increased by approximately 25% to Rmb233, based on a revised P/E ratio of 233x for 2026E [1][5] Valuation Metrics - **Valuation Ratios**: The new target price reflects a P/E ratio of 233x for 2026E, adjusted from 281x for 2025E, indicating a more conservative approach due to gross profit margin pressures on the industrial robot side [5] - **Market Capitalization**: As of January 7, 2026, Leader Drive's market cap is Rmb34,994 million (approximately US$5,011 million) [7] Competitive Landscape - **Comparison with Competitors**: While Leader Drive has a higher exposure to humanoid robot revenues, Hengli Hydraulic is preferred due to its cheaper valuation despite Leader Drive's stronger growth potential in humanoid robots [1][4] Risks and Challenges - **Downside Risks**: Key risks include slower growth in the automation market, increased competition, higher raw material costs affecting gross profit margins, and lower contributions from humanoid robots and other emerging applications [25] Financial Summary - **Projected Financials**: - **2025E Net Profit**: Rmb122 million - **2026E Net Profit**: Rmb184 million - **2027E Net Profit**: Rmb248 million - **2026E EPS**: Rmb1.006, with a growth rate of 50.7% [6][12] Additional Insights - **NVIDIA's Role**: NVIDIA's open-source platforms are expected to accelerate the development and deployment of humanoid robots, enhancing Leader Drive's market position [2] - **Capacity Expansion**: Leader Drive is expanding its production capacity from 40,000 units per month to 80,000 units per month to meet the anticipated demand for humanoid robots [4] This summary encapsulates the critical insights from the conference call regarding Leader Drive's strategic positioning, financial outlook, and market dynamics in the robotics industry.

Group 1 - The topic of humanoid robots and the Science and Technology Innovation Board is gaining significant attention in the industry [1] - Key components of humanoid robots, such as harmonic reducers, motors, and controllers, are crucial for their operation and directly impact their development [1] - There is a high market demand for robotic arms, mobile composite intelligent robots, and bipedal humanoid robots, which are expected to become investment hotspots due to their high technical barriers and large market needs [1] Group 2 - The market demand for key components like harmonic reducers, motors, and controllers is projected to increase by more than tenfold if the humanoid robot market explodes [1] - Companies that can successfully achieve industrialization and large-scale production of humanoid robots will stand out in a competitive market and provide substantial returns for investors [1]

Core Insights - The report highlights the high-quality economic development of urban areas in China, with a focus on Shenzhen's Bao'an district, which ranked fourth in the national top 100 districts for three consecutive years, emphasizing the importance of "temperature" in urban vitality and attractiveness [1] Group 1: Industrial Collaboration - Bao'an has over 50,000 manufacturing enterprises and more than 7,400 national high-tech companies, creating a symbiotic ecosystem that enhances collaborative efficiency [3] - The district's robot industry exemplifies this collaboration, where companies can find top suppliers for essential components nearby, such as TuoBang Co. for controllers and ZhaoWei for motors, showcasing a complete supply chain [3][4] - The establishment of the first national embodied intelligence industry innovation center in collaboration with Huawei Cloud enhances the synergy between software capabilities and local manufacturing, driving technological and market collaboration [4] Group 2: Business Environment - Bao'an's service environment has evolved from merely solving problems to anticipating needs, exemplified by the introduction of five service packages to support enterprise growth [5] - The district has implemented measures to reduce operational costs for businesses, such as facilitating the relocation of noisy enterprises and providing digital tools for efficient communication [5] - A comprehensive financial service system has been established, offering 96 credit products from 25 banks, and facilitating 1,170 financing transactions totaling approximately 12.126 billion yuan [6] Group 3: Quality of Life - The report emphasizes that high-quality development ultimately focuses on people, with various service circles established to ensure community welfare, such as a 5-minute emergency response and a 15-minute employment service [7] - The competitive edge of urban areas is now measured by a comprehensive ecosystem that integrates industry, services, and quality of life, fostering a self-reinforcing cycle that attracts talent and enterprises [7]

Investment Rating - The report recommends investment in companies such as Fuda Co., Ltd., Jinguan Technology, Shuanghuan Transmission, and Zhongding Sealing [2][4] Core Insights - The report emphasizes that reducers are the core components of humanoid robot joints, ensuring high precision and stability in motion control [2][9] - The humanoid robot precision reducer market is expected to grow steadily, with domestic manufacturers enhancing their supply capabilities [2][19] - Different types of reducers (harmonic, RV, planetary, and cycloidal) have distinct characteristics and applications, with cycloidal reducers emerging as a promising option for high-load joints [2][88] Summary by Sections 1. Reducers as Core Components - Reducers are essential for reducing speed and increasing torque in humanoid robots, connecting the power source to the execution structure [9][14] - The market for reducers in China is projected to reach approximately 144.8 billion yuan in 2024, with a steady growth rate of 4% to 5% over the past five years [19] 2. Demand Differentiation and Application of Cycloidal Reducers - The report identifies a growing application space for cycloidal reducers, which offer significant torque increase relative to cost and size [2][88] - Tesla's Optimus Gen2 utilizes a combination of planetary and harmonic reducers, highlighting the trend towards hybrid solutions in humanoid robots [76][80] 3. Prominent Companies and Technological Collaboration - Fuda Co., Ltd. is positioned as a leading player in the precision reducer market, with significant growth in revenue and net profit driven by the demand for new energy vehicles [99] - Jinguan Technology is expanding its footprint in the reducer market through joint ventures and product diversification [103] - Shuanghuan Transmission's subsidiary, Huandong Technology, is a key player in the RV reducer segment, contributing to the company's overall growth [108] - Zhongding Sealing is investing heavily in the humanoid robot sector, focusing on the production of harmonic reducers and joint assemblies [114] 4. Investment Recommendations - The report suggests focusing on leading companies in the reducer market, including Fuda Co., Ltd., Jinguan Technology, Shuanghuan Transmission, and Zhongding Sealing, while also monitoring emerging players like Haoneng Co., Ltd. and Landai Technology [2][4]