China Automation Pulse Check_ December 2024

Summary of the Conference Call on Asian Industrial Technology - China Automation Pulse Check: December 2024 Industry Overview - The report focuses on the automation industry in China, highlighting trends in orders and demand from various sectors, particularly in December 2024 [1][3]. Key Points Overall Market Trends - Automation demand across most end industries is experiencing growth between 10% to 20% year-over-year (YoY) [3][12]. - The headwind from the new energy sector is diminishing, with December showing particularly strong performance, continuing the trend from the fourth quarter after a weak summer [3][12]. Company-Specific Insights - AirTAC: - Shipments to battery, machine tool equipment, general machinery, electronics, and automotive industries are maintaining high growth. - New orders intake has surpassed sales, indicating strong future growth potential. - Revenue growth is stronger than seasonal trends, with expectations for moderate growth in 2025 [3][12]. - Inovance: - General automation grew approximately 20% YoY, with the impact from new energy becoming mild [3][12]. - Estun: - Sales and orders from the new energy sector have drastically declined by over 50% YoY, particularly in solar. - Other sectors, especially electronics and automotive, have shown meaningful growth, with domestic orders growing over 20% YoY in 2024 [3][12]. - Xinje: - Solid demand from consumer electronics and packaging, with logistics growing over 20% YoY. The Li-ion battery industry is recovering moderately, while solar remains muted [3][12]. - Yiheda: - In December, demand and customer confidence improved, with shipments and new orders growing approximately 20% and 30% YoY, respectively. - New energy sectors contributed about 20% of shipments, with Li-ion battery shipments at approximately 18% and solar at 3% [3][12]. Financial Metrics - AirTAC: - December 2024 sales growth was reported at 13.7%, a significant recovery from previous months [4]. - Inovance: - Orders grew by around 20% YoY in December [4]. - Estun: - Orders remained flat in December, with a notable decline in new energy orders [4]. - Yiheda: - Shipment growth was approximately 20% YoY, with a strong performance in the 3C/mobile phone and automotive sectors [4][12]. Investment Implications - The report reiterates an "Outperform" rating for AirTAC and Inovance, while maintaining a "Market-Perform" rating for Estun [12]. Risks - Risks associated with the automation sector include potential weaker-than-expected demand in China, trade frictions, and currency fluctuations. Specific risks for each company include: - AirTAC: Weaker automation demand and price competition [22]. - Estun: Integration risks from acquisitions and slower margin improvements [23]. - Inovance: Weaker demand in segments outside of servo motors and variable frequency drives (VFD) [24]. Conclusion - The automation industry in China is showing signs of recovery, with several companies reporting strong growth in various sectors. However, potential risks remain that could impact future performance. The overall sentiment is cautiously optimistic, with specific companies positioned for growth in 2025.