Takeaways from plant visit: More positive than we thought

恒立液压(601100)
    We arranged a site visit tour for investors to Hengli’s production base inChangzhou on 3 Jun. Key takeaways include: (1) Strong demand for linearguideways driven by machine tools and semiconductor segments; (2) Hugepotential for ball screws for humanoid robots due to strong commitment from themajor customer; (3) Capacity for cylinders, pumps and valves are running at fullutilisation driven by a wide range of downstream demand such as miningequipment and agricultural machinery. We revise up our 2027E/28E earningsforecasts by 4%/7%, due to higher volume assumptions. We now forecastPrecision Industry revenue (linear guideways & ball screws) to increase fromRMB80mn in 2025 to RMB0.4bn/1bn in 2027E/28E. We revise up our TP toRMB125 (from RMB109), based on 48x 2026E P/E, 1.5SD above the historicalaverage (previously 1SD). Our expanded premium is to reflect both the upcycleof hydraulic business and the huge growth potential of precision business.Reiterate BUY.
    Key takeaways:
    Linear guideways: At present, 90% of the linear actuator products arelinear guideways which are produced in Changzhou factory. The productsare applied in machine tools and semiconductor sectors which saw verystrong demand. High precision is required in these applications.
    Ball screws for humanoid robots: A typical humanoid robot needs a totalof 14 ball screws (4 for each leg; 3 for each arm excluding fingers). Henglibelieves the keys to success in ball screw business include (1) productdesign; (2) production yield rate (for cost reduction); and (3) inspection (forproduct quality). Hengli has strong bonding with the major overseascustomer and can participate in certain product design. Hengli’s productscurrently account for <10% of the total value of a humanoid robot but willpotentially increase to 10-20% in the future. According to Hengli, ball screwshipment volume is insignificant at the moment but is expected to see strongvolume growth in 2H26E, and it will likely allocate the production of ballscrews to Mexico plant. We expect Hengli will further expand its capacityover the coming years.
    Strong growth across hydraulic business lines: Demand for excavatorcylinders, pumps & valves is robust, and capacity is running at full utilisation.For instance, strong mining activities in Africa have boosted highreplacement demand for mining equipment. For pumps & valves, Hengli isconfident of increasing their penetration in the major US machinerymanufacturer (10% at present), as the Japanese hydraulic componentsmakers have just raised ASP.

高盈利弹性，高分红比例；首次覆盖给予买入评级

宏桥控股(002379)
    根据我们最新的行业分析，全球电解铝供给缺口将在2026年进一步扩大，并将延续至2027年（参阅我们同步发布的行业报告）。我们认为，承载了中国宏桥（1378HK，买入）主要运营资产的宏桥控股，将显著受益于铝价高企。我们看好宏桥控股较高的盈利弹性（铝价每变动1%，盈利变动约3.3%）以及潜在的高分红比例（我们的模型假设为75%）。首次覆盖给予买入评级，目标价人民币29元，基于13.2倍2026年市盈率，相较我们给予中国宏桥的目标估值倍数（11倍）溢价20%。该溢价幅度与中国铝业（2600HK/601600CH，未评级）当前的A/H股溢价水平一致。
    与中国宏桥的比较：2025年12月宏桥控股完成借壳上市后，中国宏桥目前持有宏桥控股89%的股权。宏桥控股与中国宏桥在以下几个关键方面存在差异：(1)宏桥控股不持有铝土矿业务的股权；(2)氧化铝产能较中国宏桥少200万吨，因未包含印尼氧化铝资产；(3)不持有自备电厂。
    核心假设：对于重叠的业务条线，我们的核心经营假设与中国宏桥保持一致。我们预计2026年铝价同比上涨15%，氧化铝价格同比下降13%；2027年铝价/氧化铝价格预计同比仅分别小幅下降3%/5%。
    对铝价更为敏感。我们测算，铝价每上涨1%，宏桥控股2026年盈利将提升约3.3%（在其他条件不变的情况下）。盈利敏感度高于我们测算的中国宏桥盈利敏感度（2.3%）。
    高派息比率以支撑中国宏桥分红。中国宏桥2025年派息比率超过66%。假设中国宏桥未来继续维持该分红比率，则宏桥控股需要保持较高的分红水平。
    核心风险：(1)中国电解铝产能上限意外取消；(2)海外电解铝产能投放快于预期；(3)全球经济放缓；(4)铝土矿、煤炭等原材料成本大幅攀升。

High earnings sensitivity to aluminium price, high dividend payout; initiate with BUY

宏桥控股(002379)
    Our latest industry analysis suggests that the global aluminium supply deficit willwiden in 2026E and will remain in place in 2027E (see our sector note publishedtoday). We believe Hongqiao Holdings, which carries the majority of operatingassets of China Hongqiao (1378 HK, BUY), will benefit from the elevatedaluminium price. We like Hongqiao Holdings’ high earnings sensitivity (~3.3%for 1% change in aluminium price) and high potential dividend payout ratio (75%in our model assumption). Initiate with BUY with TP of RMB29, based on 13.2x2026E P/E, equivalent to 20% premium to our target multiple (11x) for ChinaHongqiao. Our premium is in line with the current A/H premium of Chalco (2600HK/601600 CH, NR).
    Comparison with China Hongqiao. After the completion of backdoorlisting in Dec 2025, China Hongqiao currently owns 89% interest inHongqiao Holdings. Hongqiao Holdings differs from China Hongqiao inseveral key aspects: (1) It has no equity interest in bauxite business; (2) Itsalumina capacity is 2mt less than China Hongqiao as the Indonesia aluminais not included; (3) It does not own captive power plants.
    Key assumptions. For the duplicated business lines, our key operatingassumptions are the same as that for China Hongqiao. For 2026E, weforecast 15% YoY increase in aluminium price and 13% YoY decline inalumina price. For 2027E, we forecast aluminium / alumina price to onlyslightly drop 3%/5% YoY.
    More sensitive to aluminium price. We estimate every 1% increase inaluminium price will boost Hongqiao Holdings’ 2026E earnings by ~3.3%(other factors being constant). This is more sensitive than China Hongqiao’s2.3%, based on our calculation.
    High dividend payout ratio to support China Hongqiao. ChinaHongqiao’s dividend payout ratio was >66% in 2025. Assuming that ChinaHongqiao is to maintain such ratio going forward, Hongqiao Holdings willhave to maintain a high payout ratio.
    Key risks: (1) unexpected removal of capacity cap in China; (2) faster-thanexpected overseas capacity ramp-up for the industry as a whole; (3)slowdown of the global economy; (4) sharp increases in costs of input suchas bauxite and coal.

1Q26 in line; overseas and emerging businesses driving growth

迈瑞医疗(300760)
    Mindray reported1Q26revenue of RMB8.35bn(+1.4%YoY)and attributablenet profit of RMB2.3bn(-11.3%YoY),largely in line with our expectations.Overseas business remains the major growth driver with robust momentum inEurope and developing markets.Domestic business still faced near-termheadwinds from channel destocking in1Q26.We maintain our FY26E revenueforecast,expecting a return to positive domestic growth in2026E.
    Rapid overseas growth led by Europe and emerging markets.Overseasrevenue increased15.7%YoY to RMB4.45bn,representing53%of totalrevenue in1Q26.Revenue from Europe grew more than25%YoY,with keymarkets including the UK,France,Germany,and Italy delivering rapidgrowth as penetration into high-end accounts accelerated.Emergingmarkets also recovered,up15%YoY,with India and Mexico each growingmore than30%.By segment,overseas IVD(>20%YoY),PMLS(15%YoY),and medical imaging(>10%YoY)all reported strong growth.We expectdeepening localization and continued progress in high-end accounts to driveoverseas growth in2026E.
    Domestic business remained under pressure but is expected torecover in2026E.Domestic revenue declined11.1%YoY to RMB3.9bn in1Q26,primarily due to channel destocking in PMLS and MIS.However,domestic CLIA revenue increased by~10%YoY in1Q26despite VBP-related price pressure,driven by further penetration into large hospitalaccounts.Consequently,Mindray’s share in core IVD categories(CLIA,chemistry,coagulation)rose from10%in1H25to13%in1Q26,accordingto Mindray’s1Q26report.The MT8000TLA system completed over80installations in1Q26,which should support reagent pull-through goingforward.Moreover,domestic emerging businesses increased over18%YoYand accounted for23%of domestic revenue.While destocking in equipmentbusinesses(PMLS+MIS)may still weigh on near-term growth,thesesegments accounted for less than30%of domestic revenue.Therefore,weexpect domestic revenue to return to positive growth in2026E,supportedby IVD share gains,continued growth in emerging businesses,and aneasier comparison base.
    Emerging businesses grew rapidly.Revenue from emerging businessesreached RMB1.4bn in1Q26,up18.2%YoY.Notably,IVD and emergingbusinesses together accounted for nearly40%of overseas revenue andmore than70%of domestic revenue,highlighting steady progress inMindray’s shift toward recurring,consumables-based revenue mix.
    Maintain BUY.We maintain our FY26-28E earnings forecasts and deriveour target price of RMB204.54based on a9-year DCF model(WACC:9.1%,terminal growth:3.0%;both unchanged).

1Q26 results: a strong start driven by CDMO services

康龙化成(300759)
    RMB3.58bn and adj.non-IFRS attributable net profit increasing16.2%YoY toRMB406mn.1Q26revenue/adj.net profit accounted for21.8%/18.8%of our full-year estimates,largely in line with historical ranges.New orders in1Q26surgedover30%YoY,a significant acceleration from the14%YoY growth recorded in2025.Mgmt.maintained full-year revenue growth guidance of12%-18%.
    Demand accelerated in1Q26.Total new orders grew by>30%YoY in1Q26,including>20%and>50%YoY growth for lab services and small moleculeCDMO,respectively,both significantly outpacing their2025growth rates.This encouraging order momentum was primarily driven by:1)Successfulstrategic expansion with MNC clients,with1Q26revenue from Top20globalpharmaceutical companies soaring47.98%YoY;2)A recovery in domesticdemand,as revenue from Chinese clients grew43.4%YoY,coupled with astrong out-licensing trend where Pharmaron has been playing a critical role;3)Continued rapid revenue growth from new modalities;and4)The signingof a major DP(Drug Product)contract in the small molecule CDMO segment,alongside the progression of other pipeline projects into later stages.
    Strong demand in small molecule CDMO.The segment generated revenueof RMB866mn in1Q26,up25.0%YoY,significantly outperforming othersegments.Notably,the Company secured a commercial DP contract for EliLilly's oral small molecule GLP-1drug,Orforglipron,in1Q26.Serving over1,000projects annually with a broad coverage of promising targets andmolecules,Pharmaron is well-positioned to capture major manufacturingorders in the future.As current capacity is highly utilized,the Company willcontinue to advance the PhII construction at Shaoxing site and plan for newcapacity expansions.Mgmt.expects capex for2026to be~RMB3.0bn(+12.4%YoY),with a strategic focus on bolstering CDMO capacity for late-stage projects and new modalities.Based on current demand and capacityplanning,mgmt.expects the small molecule CDMO segment to consistentlyoutpace the Company’s overall growth in the coming years.
    Clinical services targeting loss reduction this year.Revenue from clinicalservices increased by11.8%YoY,accelerating from the7.1%YoY growth in2025.However,segment GPM came in at7.1%in1Q26,down4.7ppts YoY,primarily due to revenue mix changes and pricing competition in Chinamarket.Regarding new orders,SMO pricing has shown recoveries,whileCRO price pressure has moderated compared to last year.Nevertheless,given the long conversion cycle of clinical programs,the Company is stillexecuting low-priced orders secured last year.Mgmt.expects the segment toremain in a loss-reduction phase throughout2026,with performance likely toimprove next year as higher-priced orders set to be converted into revenue.
    Maintain BUY.Our DCF-based TP is maintained at RMB39.00(WACC of9.32%;terminal growth of2.0%;both unchanged).We forecast Pharmaron’srevenue to grow by16.5%/16.2%/14.9%YoY and adj.net profit to increaseby18.8%/17.8%/16.1%YoY in2026E/27E/28E,respectively.

Transition pains persist; wait and HOLD

卓胜微(300782)
    Maxscend released its FY25results.Revenue declined by17%to RMB3.7bn(9%below BBG consensus and ours),while net loss was RMB293mn.GPMdeclined by13.8ppts to25.7%(1ppt below BBG consensus/6ppts below ours)due to1)low utilization rates at both6-inch(~50%)and12-inch(30-40%)fabs,2)an unfavorable product mix due to the delay in higher-margin module rampand a greater contribution from lower-value products,and3)increased rawmaterial costs driven by AI-related demand crowding.More fundamentally,theCompany remains in a transition phase toward a fab-lite model with elevateddepreciation and ramp inefficiencies continuing to pressure near-term earnings.Maintain HOLD on the Company with TP revised to RMB91,correspondingto45x2027E EV/EBITDA(rolled forward from45x2026E)to reflect thedelayed pace of margin normalization and earnings recovery.We lower oursales forecast for2026/27E by24%/27%,and GPM by8.7ppts/8.2ppts,reflecting intensified market competition and low fab utilization.
    Revenue mix gradually improving on L-PAMiD ramp,though stillbelow potential.We view L-PAMiD as the key driver of medium-termrecovery,given its successful entry into domestic tier-1supply chains andclear advantages in cost,size,and integration via bare-die packaging.InFY25,RF module mix increased to45%(from42%in FY24),althoughabsolute revenue declined11%YoY due to delayed ramp and supplyconstraints earlier in the year.Meanwhile,RF discrete revenue mix fell to52%(from56%),with revenue declining~22%YoY,reflecting both weakerend demand and pricing pressure in more commoditized segments.Weexpect mix to continue improving into2026on the back of L-PAMiD rampand increasing contribution from high-integration modules.
    1Q26earnings showed early signs of stabilization,but marginpressure persists.Revenue grew9%YoY to RMB828mn but declined14%QoQ due to seasonality,while GPM fell to18.5%(vs.31%in1Q25and22.8%in4Q25)in1Q26,reflecting continued low utilization,elevateddepreciation,and ongoing pricing pressure as the Company prioritizesshare gains.We expect revenue to gradually recover through2026on L-PAMiD ramp,but margin recovery will likely lag,with meaningfulimprovement contingent on utilization ramp and higher contribution fromcustomized higher-value modules.
    12-inch Xinzhuo fab a long-term strategic asset with limited near-termcatalysts.The fab has reached stable mass production with competitiveyields and supports key processes such as SOI(silicon on insulator)andheterogeneous integration,enabling internalization of high-value modules.While low utilization continues to weigh on margins,we see it driving long-term competitiveness and potential margin upside,with earningscontribution dependent on utilization ramp.
    Maintain HOLD with TP revised to RMB91,corresponding to rollover2027E EV/EBITDA of45x(prev.45x2026E EV/EBITDA)as we expect salesto stabilize on L-PAMiD ramp while profitability remains constrained by lowutilization and elevated depreciation,both of which are unlikely to materiallyimprove within2026.However,we think the Company deserves a premiumto peers due to its unique positioning as a vertically integrated,full-stackRFFE player while most other peers remain fabless or partially integrated.Upside risks:Improving end market demand,raw material price reduction,etc.;downside risks:Worsening end market demand,R&D challenges,etc.

Strong 2025 results driven by overseas expansion and domestic share gains

联影医疗(688271)
    United Imaging (UIH) reported strong 2025 results. Revenue rose 34.0% YoY toRMB13.8bn, 4% above our estimate, while attributable net profit increased 48.1%YoY to RMB1.9bn. In 1Q26, revenue grew 17.3% YoY to RMB2.9bn, slightlymissing our expectation, accounting for 17% of our full-year forecast (vs. thehistorical average of ~20%). We therefore lower our 2026E revenue growthforecast from 25.7% to 22.5% YoY, although our absolute revenue estimateincreases by 1.4% on a higher base in 2025.
    Overseas expansion remains the key growth driver. Overseas revenuerose 51.4% YoY to RMB3.4bn in 2025, driven by strong growth across majorregions, including North America (+56% YoY), Europe (+50% YoY), and APAC(+41% YoY). Momentum remained solid in 1Q26, with overseas revenue up~27% YoY to approximately RMB710mn. In our view, the strong performancewas driven by continued progress in high-end products such as PET/CTs andMRs, as well as improving global sales and service network. Overseas servicerevenue grew ~53% YoY in 2025. With rising brand recognition and increasingpenetration into high-end customers, we expect overseas revenue to maintainrobust growth in 2026E.
    Domestic growth was driven by market share gains. Domestic revenuegrew 29.1% YoY to RMB10.4bn in 2025, with UIH ranking No.1 in newinstallations across multiple products, including CT, MR, MI and RT. Sharegains were particularly notable in MR (+6.4ppts), RT (+18.1ppts), and PET/CT(+13.5ppts). Looking ahead, equipment renewal projects are continuing to rollout. With the implementation experience in 2025, we expect the execution toaccelerate and continue to support hospital procurement demand. However,the domestic market for medical imaging equipment declined 21.1% YoY in1Q26, according to MDDi. Therefore, we believe that UIH’s revenue growth willface tougher comparisons in 2H26E given the lags between tender wins andrevenue recognition.
    Near-term GPM headwinds partially offset by favorable product mix. GPMdeclined 1.5ppts/2.8ppts YoY to 47.0%/47.2% in 2025/1Q26, respectively,mainly due to domestic VBPs, tariffs and higher liquid helium costs.Encouragingly, blended ASP increased by more than 20% YoY in 2025, drivenby a richer mix of high-end systems. For example, revenue from 3.0T-andabove MR systems grew over 60% YoY and accounted for over two thirds oftotal MR revenue in 2025. Service revenue, which carries higher GPM thanequipment sales, rose 26% YoY and accounted for 12.4% of total revenue in2025. We believe that the mix shift toward high-end systems and servicesshould help partially offset pressure from VBPs, tariffs, and elevated liquidhelium costs. More diversified helium sourcing and greater in-house productionof key components should also support margin improvement.
    Maintain BUY. We remain positive on UIH’s long-term growth. However, welower our 2026-28E earnings forecasts to factor in VBP pressure and elevatedliquid helium costs in the near term. We therefore lower TP to RMB161.04based on a 9-year DCF model (WACC: 8.1%, terminal growth: 4.0%)

1Q OPAT a slight beat; positive outlook for full-year NBV and life OPAT acceleration

中国平安(601318)
    Ping An posted solid1Q results,with Group OPAT up7.6%YoY to RMB40.8bn,outpacing our estimate of RMB39.2bn(link).This increase can be attributed to1)aresilient L&H OPAT uptrend(+4.6%vs CMBI est:+4.5%);2)PAB profit turnaround(+3.0%);and3)a notable surge in AM profitability(+193.3%).Group NPAT fell7.4%YoY to RMB25bn,slightly better than our estimate of RMB24.3bn,due to heightenedmarket headwinds in1Q26.Group net asset value(NAV)grew1.8%from year-startto RMB1.02tn,in line with our forecast.Life NBV grew20.8%YoY to RMB15.6bn(vs.CMBI est:RMB15.4bn),primarily driven by new business sales(+45.5%YoY)partially offset by a softening margin(-4.8pct YoY).P&C UW performance was abeat,with COR down0.8pct YoY to95.8%and non-auto premium rising19.5%YoY,which exceeded the industry average growth of5.3%YoY in1Q26.Mgmt.mentioned in the call that achieving double-digit NBV growth in2026E is abaseline target,and we are positive on a high-teens NBV uptick and life OPATacceleration in2026E as CSM approaches an inflection point.Maintain BUY,with our SOTP-based H/A-share TP at HK$86/RMB75,implying0.83x FY26E P/EV.
    1Q OPAT a slight beat,driven by L&H/PAB/AM.Group OPAT growth in1Q26was mainly driven by increases in Life&Health(+4.6%),Ping An Bank(+3.0%)andAM(+193.3%).L&H OPAT growth was broadly in line with our forecast,with newbusiness CSM likely to achieve a promising rise amid stable interest rates.Thebanking business returned to positive growth,driven by1)a stabilized NIM(1Q26:1.79%vs FY25:1.78%),and2)non-interest income growth from wealthmanagement and bond investments.AM OPAT amounted to RMB3.2bn in1Q26,nearly tripling from1Q25,thanks to upside from brokerage and asset managementbusinesses amid heightened equity volatility,which bolstered trading activity.Wemaintain our view that continued easing of the AM drag and expected LifeOPAT acceleration should drive the Group’s valuation re-rating over time.
    L&H OPAT in-line;NBV rose on higher new business sales.Life NBV grew20.8%YoY to RMB15.6bn,driven by strong new policy sales(+45.5%)partiallyoffset by a4.8pct YoY decline in margin to23.5%.Mgmt.noted that this margincontraction was not due to product or channel skewness,but rather the fact thatthe comparable1Q25figures were not adjusted for changes in actuarialassumptions.Overall,NBV margin stood stable vs.the year-start level of23.4%.Bancassurance was the leading channel for NBV growth,with its contribution(together with community finance)rising6.8pct YoY to31%in1Q26.Agentheadcount declined5.4%from year-start to0.33mn,partly due to seasonality.Weexpect NBV to reach high-teens YoY growth in2026E led by new biz sales.
    P&C underwriting beat;OPAT weighed by investment.P&C COR improved0.8pct YoY to95.8%in1Q26,better than our estimate of96.1%,due to lowerNAT CAT claims and continued expense rate controls across non-auto insurancelines.Total premium rose6.8%YoY to RMB91bn,with auto insurance down0.6%YoY to RMB53bn and non-auto up19.5%YoY to RMB38bn in1Q26.Per mgmt.,non-auto premium growth was mainly driven by health insurance.UW profit grew28.4%YoY to RMB3.5bn,but this was partially offset by a decline in investmentreturns,resulting in a13.4%YoY decrease in P&C OPAT in1Q26.
    Maintain BUY with TP of HK$86/RMB75.The stock is trading at0.6x FY26E P/EVand0.8x FY26E P/B.We are positive on the prospect of Ping An’s core businessimprovement,including1)Life OPAT acceleration in2026E as CSM approachesthe inflection;2)PAB profit enhancement;and3)ongoing progress on AM de-risking.Maintain BUY with our SOTP-based TP at HK$86(H-share,unchanged)and RMB75(A-share,added),implying0.83x FY26E P/EV and1.2x FY26E P/B.

Sustainability of growth remains to be seen

浙江鼎力(603338)
    Dingli’s share price surged 10% yesterday (28 Apr) following better-thanexpected 1Q26 results (strong revenue growth + QoQ gross marginimprovement + lower expense). Take a closer look at the results, however, couldfind it difficult to conclude that the high growth is sustainable. First, we believethe revenue growth in 1Q26 (30% YoY) included part of the US tariff passthrough. Second, the decline in SG&A expense ratio (through efficiencyenhancement of the US subsidiary) has lasted for several quarters, setting a lowbase for upcoming quarters. We revise up our 2026E/27E earnings forecasts by3%/6%, due to higher sales volume assumptions (slightly offset by lower financeincome). Our TP is revised up to RMB59 (from RMB48), based on 14x 2026 P/E(0.5 SD below the three-year average P/E unhanged). We maintain our HOLDrating for now until we see a more sustainable growth trend.
    1Q26 results highlights. Revenue grew 30% YoY to RMB2.46bn. Grossmargin contracted 6.8ppts YoY but expanded 5.2ppts QoQ to 33.8% (note: 2-month US tariff impact in 1Q26 before the court’s ruling to halt). Given thatboth the SG&A and R&D expense ratio dropped YoY in 1Q26, EBIT grew 38%YoY to RMB609mn. Net finance expense was RMB82mn (vs net financeincome of RMB93mn in 1Q26), due to appreciation of RMB. Net profit grew6% YoY to RMB453mn, while operating cash outflow improved 61% YoY toRMB186mn.
    Latest Anti-dumping (AD), countervailing duties (CVD) and tariff: The USlatest AD rate on Dingli is set at 18.27% (effective from 16 Apr 2026), with arate same as Sinoboom, Terex (Changzhou) Machinery (owned by Terex [TEXUS, NR]) and Oshkosh JLG (Tianjin) Equipment (owned by Oshkosh [OSKUS]). The latest AD, together with the CVD (33.1%) and Section 301 tariff(25%), adds up to a total rate of ~76% for Dingli’s AWPs selling into the US.We think such level of rate is still manageable given Dingli’s rich experience indealing with tariff and duties.
    Upside risks: (1) recovery of AWP demand; (2) strong demand for newproducts.
    Downside risks: (1) further intensified competition in China’s AWP market;(2) additional tariff/AD/CVD.

1Q26 results: small molecule D&M fuelling overall growth

药明康德(603259)
    WuXi AppTec released better-than-expected 1Q26 financial results. Revenuegrew by 28.8% YoY to RMB12.4bn with continuing operations revenue increasingby 39.4% YoY, while adj. non-IFRS attributable net profit surged 71.7% YoY toRMB4.6bn. 1Q26 revenue/ adj. net profit represent 24.1%/ 25.6% of our full-yearforecasts, respectively, significantly higher than the historical average of 18-20%.As of 1Q26, backlog for continuing operations grew by 23.6% YoY (+29% YoY ifexcl. FX fluctuations) to RMB59.8bn, with new orders signed in 1Q26 growing byover 25%. Mgmt. maintained full-year guidance, projecting 2026 revenue to reachRMB51.3-53.0bn, with revenue from continuing operations to grow by 18-22%YoY. Adj. net profit margin is expected to remain stable. Mgmt. indicated plans toraise the guidance in due course based on future business developments.
    CRDMO model to capture global blockbuster opportunities. Within thismodel, drug discovery and development services continuously funnel projectsto downstream. The Company delivered +420,000 new compounds over thepast 12 months, converted 83 projects from R to D, and added nine new PhIIIand commercial projects in 1Q26. This funnel model, which covers a widerange of therapeutic areas and a large customer base globally, allows theCompany to identify industry trends and build capacity in advance. As aresult, this approach has enabled WuXi AppTec to capitalize on commercialopportunities for multiple global blockbuster products, including oral COVID-19 drugs and peptides/ small-molecule GLP-1 drugs. Benefiting from oralGLP-1 drugs, revenue from small molecule D&M surged by 80.1% YoY in1Q26, creating a new growth engine for the Company. As a natural extensionof CRDMO model, TIDES saw 1Q26 revenue growth impacted by the pacingof product deliveries, resulting in a modest 6.1% YoY increase. However,based on a robust backlog, mgmt. expects full-year revenue for this segmentto grow by ~40%, reflecting mgmt's confidence in the TIDES business.
    Continued capacity expansion. Driven by growing global demand, WuXiAppTec plans to bring the construction of new Changzhou site ahead ofschedule, which will house both small molecule and TIDES capacity. Mgmt.targets the total solid-phase synthesis reactor volume to reach 130k liters bythe end of 2026, up from 100k liters at the end of 2025. Despite theuncertainties from the Middle East, the strategic cooperation agreementsigned with the Saudi government last Oct is proceeding as planned, a keycomponent of the Company's long-term strategy to build global capabilitiesand capacity. Mgmt. forecasts 2026 capex to be RMB6.5-7.5bn, representinga YoY increase of 17.3-35.4%. We believe that WuXi AppTec's mature globalCRDMO network and ongoing expansions will further reinforce its leadingposition in the global pharmaceutical outsourcing industry.
    Maintain BUY. To factor into the strong momentum of small molecule D&Mbusiness, we lift our earnings forecasts, expecting revenue to grow by 15.2%/16.3%/ 14.8% YoY (for continuing operations: 20.6%/ 16.3%/ 14.8% YoY)and adj. net profit to grow by 26.2%/ 18.0%/ 15.8% YoY in 2026E/ 27E/ 28E,respectively. Hence, we raise our DCF-based TP from RMB133.00 toRMB143.00 (WACC: 9.39%, terminal growth: 2.00%; both unchanged).

Overseas, R&D support 1Q26 earnings resilience

比亚迪(002594)
    Maintain BUY.BYD’s1Q26average selling price(ASP)and GPM both beatour prior forecast with overseas contribution,which echoed our previous reporttitled“overseas sales could be a positive surprise in FY26”(link).We expectFY26E GPM to sustain,as we estimate overseas vehicle GPM could be6-8ppts higher than that in China.BYD also becomes more prudent on expenses,especially on R&D,which could provide earnings resilience with highercapitalization ratio.We still believe BYD is one of the biggest beneficiaries fromhigh oil price.
    1Q26revenue,GPM beat on overseas.BYD’s1Q26revenue fell by12%YoY amid a sales volume decline of30%YoY,or13%higher than our priorforecast,as overseas accounted for46%of BYD’s total sales volume in1Q26.That also lifted its GPM by1.4ppts QoQ to18.8%,0.3ppts higherthan our forecast.R&D expenses were more disciplined than we hadprojected while forex loss was higher than expected.All combined resultedin a net profit of RMB4.1bn in1Q26,or about RMB0.7bn higher than ourforecast.
    BYD’s overseas potential could still be underestimated.We estimatethat BYD’s overseas vehicle GPM could be6-8ppts higher than that inChina,based on1Q26and4Q25data with assumptions of minimal QoQchanges in ASPs and GPMs.We maintain our FY26E total sales volumeforecast of5mn units but revise up overseas sales volume by0.1mn unitsto1.6mn units.Accordingly,we raise our FY26E revenue forecast by2%.We also believe higher sales volume from overseas could sustain BYD’sFY26E GPM,despite raw-material price hike and heavy capex.We projectFY26GPM to only narrow by0.1ppt YoY to17.6%.
    R&D capitalization provides earnings resilience.We estimate that R&Dcapitalization ratio rose to about17%in1Q26from9%in FY25,which wasone of the reasons for the net profit beat.As we noted a few times before,BYD’s low R&D capitalization ratios in the past four years have minimizedits amortization burden in the future,which could provide its earningsresilience.We raise its FY26/27E R&D capitalization ratio assumptionsfrom7%/7%to15%/12%.Accordingly,we revise up FY26/27E net profitforecasts by4%/6%to RMB37.9bn/46.3bn.
    Valuation/Key risks.We maintain our BUY rating and A/H share targetprice of HK$125/RMB125,based on22x(prior23x)our FY27E P/E,toreflect the recent market volatility.Key risks to our rating and target priceinclude lower sales volume or margins than we expect,as well as a sectorde-rating.

Robust overseas momentum and domestic

南微医学(688029)
    A solid 2025; 1Q26 revenue slightly ahead of expectations. In 2025, MicroTech reported revenue of RMB3.2bn (+15.5% YoY) and attributable net profit ofRMB570mn (+3.1% YoY). Its 1Q26 revenue grew 22.1% YoY to RMB854mn,slightly beating our expectations and accounted for 24% of our full-year forecast(vs. the historical average of 21%). Attributable net profit declined 9.0% YoY toRMB146mn primarily dragged by FX losses. Given the strong growth ofoverseas business and potential recovery of domestic business, we raise our2026 full-year revenue growth estimates from 11.4% to 15.9%.
    Overseas business remained the primary growth engine. In 2025,overseas revenue increased 40.9% YoY to RMB1.9bn. Excluding theRMB267mn contribution from subsidiary CME, organic overseas growthremained solid at ~21%. This strong momentum persisted in 1Q26, withoverseas revenue up 28.2% YoY, lifting its revenue contribution from 60%in 2025 to 61% in 1Q26. We believe the acquisition of CME and CONMED’s(CNMD US, NR) GI endoscopic consumable product lines will significantlyenhance Micro-Tech’s direct sales footprint in US and European markets.We continue to view the direct sales capability as a critical competitive moatfor its rapid overseas growth. Additionally, the January 2026 launch of theThailand manufacturing center should further enhance its global deliveryefficiency and supply chain resilience.
    Domestic market showed signs of recovery. While 2025 domesticrevenue declined 9.6% YoY to RMB1.25bn due to the VBPs, 1Q26 domesticrevenue recovered with a 13.6% YoY growth. Notably, domestic sales of GIproducts grew ~25% YoY in 1Q26. Despite the ongoing VBPs inGuangdong and Zhejiang provinces, we believe the marginal policy impactis weakening, driven by the rapid growth of innovative products. In our view,Micro-Tech’s domestic business has shown signs of bottoming out.
    Innovative products contributed meaningful incremental growth.Revenue from innovative products (including visualization business) grewover 40% YoY in 2025, accounting for 8% of total revenue. In 1Q26, revenuefrom innovative products increased 65% YoY, expanding their revenueshare to 10.6%. With domestic channel inventory for single-use endoscopeslargely digested and strong global growth, we expect visualization businessto maintain robust momentum in 2026E. Overall, we see the continued rampof the innovation portfolio and overseas expansion as effective offsets todomestic VBP pressure.
    Maintain BUY. Given the slight 1Q26 revenue growth beat, we raise our2026E–2028E revenue forecasts. Accordingly, we raise our target price toRMB97.38 based on a 10-year DCF model (WACC: 10.7%, terminal growth:2.0%; both unchanged).

1Q26 EBIT +34% YoY above expectation; net profit dragged by FX loss

恒立液压(601100)
    Hengli’s 1Q26 net profit came in at RMB653mn, which increased only 6% YoYlargely due to the recognition of net finance expense (RMB162mn vs net financeincome of RMB199mn in 1Q25) as a result of the appreciation of RMB. EBITgrew 34% YoY to RMB775mn, driven by an impressive revenue growth of 33%YoY. Meanwhile, operating cash inflow in 1Q26 surged 9x YoY from a low baseto RMB518mn. We see these as a set of decent operating results. We think FXvolatility is normal and believe it should not affect the core valuation of Hengli.Maintain BUY with an unchanged TP of RMB109, based on 42x 2026E P/E(+1SD above the historical average unchanged, to reflect the machinery upcycleand humanoid robot components growth).
    Risk factors: (1) Slowdown of demand for hydraulic components; (2)slower-than-expected new business development.

New-model sales as key after 1Q26 solid GPM

长城汽车(601633)
    Maintain BUY.Great Wall’s1Q26GPM beat our prior forecast despite industryheadwinds,which gives us more confidence in its FY26-27E GPM.We are ofthe view that the chance of rolling out a competitive new model for Great Wallis increasing given its planned12new models this year.
    1Q26core profit largely in line,GPM beat.Great Wall’s1Q26revenuerose13%YoY amid a sales volume growth of5%YoY,or4%lower thanour prior forecast.GPM widened by0.6ppts YoY to18.5%in1Q26despiterising raw-material costs,0.7ppts higher than our forecast.SG&A and R&Dexpenses were largely in line with our projection.Recycling feereimbursement in Russia was at a slower pace than we had expected,which resulted in a net profit of RMB945mn in1Q26,in line with ourforecast excluding Russia’s recycling fee reimbursement.
    We turn more positive on GPM in FY26-27E.Great Wall’s GPM beat ourforecasts by two quarters in a row,which gives us more confidence in itsfull-year margins despite rising raw-material costs.We project its FY26GPM to widen by0.1ppts YoY to18.1%,aided by rising exports,the newplatform Guiyuan and better product mix.We expect the cost reductionefforts from the new platform to be more apparent in FY27E with more newmodels.Therefore,we project FY27E GPM to be17.9%despite a morecompetitive industry landscape.
    Possible positive surprise from a plethora of new models.Great Wallplans to roll out about12new models in FY26E,the same amount as FY24and FY25combined.Although we are of the view that Great Wall is stilloptimizing its model line-up after the lessons from the Wey Lanshan,Gaoshan and Ora5,the chance of having a more competitive new modelis increasing.We project its FY26E sales volume to rise10%YoY to1.45mn units,largely driven by Wey.We expect Wey and Ora to furtherdrive FY27E sales volume higher to1.6mn units.
    Valuation/Key risks.We cut our FY26E net profit forecast by13%toRMB10.2bn with slightly lower sales volume,higher selling expenses andlower other income assumptions.We raise our FY27E net profit by4%toRMB11.8bn as new model effect could be more apparent next year.Wemaintain our BUY rating and H-share target price of HK$19.00,based on12x FY27E P/E(prior12x FY26E P/E).Our A-share target price ofRMB28.50is based on Great Wall’s average A/H premium of70%over thepast six months.Key risks to our rating and target price include lower salesvolume and margins than we expect,as well as a sector de-rating.

4Q25 earnings miss on gross margin and FX loss; But structural growth outlook still intact

恒立液压(601100)
    Hengli’s net profit in 4Q25 dropped 10% YoY to RMB647mn, which is 10%/5%below our/Bloomberg consensus estimates. The major deviation came from (1)a lower-than-expected gross margin (-6.11ppts YoY to 40.6%) due to highersales of non-excavator component products; and (2) a RMB206mn net financeexpense due mainly to fx loss (appreciation of RMB). That said, we are stayingpositive on Hengli as we expect continuous penetration into differentdownstream segments, as well as the structural growth outlook of humanoidrobots. We slightly revise up our 2026E/27E earnings forecasts by 1%/4%, dueto higher revenue and lower expense ratio assumptions. We slightly revise upour TP to RMB109 (from RMB105), based on 42x 2026E P/E (+1SD above thehistorical average unchanged, to reflect the machinery upcycle and humanoidrobot components growth). We see any post-results share price pullback asbuying opportunities.
    Key highlights in 2025 results: Revenue in 2025 grew 17% YoY toRMB10.9bn (hydraulic cylinders: +10%; pump & valve: +21%; hydraulicsystems: +30%; components: +30%). Blended gross margin contracted1.2ppts YoY to 41.6%, due largely to a 2.9ppt YoY contraction of hydrauliccylinders margin. EBIT was +16% YoY due to lower SG&A and R&Dexpense ratio. Net profit only increased 9% YoY to RMB2.73bn due to asharp reduction of net finance income as a result of FX loss. Operating cashinflow dropped 27% YoY to RMB1.8bn.
    Risk factors: (1) Slowdown of demand for hydraulic components; (2)slower-than-expected new business development.

Building for the next leg of WFE growth

北方华创(002371)
    Naura reported FY25 revenue of RMB39.4bn, up 31% YoY and broadly in linewith our and Bloomberg consensus, while net profit declined 1.8% YoY toRMB5.5bn, below expectations due to heavier R&D investment and opexassociated with increased hiring and Kingsemi consolidation. While 4Q margincame under pressure, we view this primarily as a result of intensified productvalidation rather than deterioration in end demand. Encouragingly, the Companycontinued to deliver strong top-line momentum on robust IC equipment growth(50%+ YoY) and ongoing product expansion into higher-value process steps.We remain positive on Naura’s positioning as a core beneficiary of China’s WFElocalization trend and domestic foundry capex expansion. Maintain BUY andraise TP to RMB540, based on 35x 2027E P/E (prev. 35x 2026E P/E), as welook through near-term margin headwinds and focus on the sequential recoveryand the anticipated earnings inflection in 2027E.
    Naura’s etching and deposition segment revenue both exceededRMB10bn in FY25, driving IC equipment revenue growth of more than 50%YoY, per mgmt. We believe this performance shows Naura’s strengtheningposition in China’s domestic WFE supply chain. Looking ahead, new productofferings such as 12-inch PVD, vertical furnace systems and HBM-relatedhybrid bonding solutions should support deeper penetration into logic,memory and advanced packaging, providing a broader and higher-qualitygrowth runway into 2026E and beyond. We expect IC equipment sales togrow by over 40% YoY in 2026E.
    Near-term profitability softened on investment and validation butshould improve as scale benefits emerge. Naura’s 4Q margins werepressured by elevated component upgrade costs during client validation fornew products and weaker profitability in non-IC segments such as PV. At thesame time, Naura continued to invest aggressively for future growth, withR&D expenses up 46% YoY and admin expenses rising 102% YoY followingthe Kingsemi consolidation and headcount expansion. We expectprofitability to improve progressively as validated tools move into volumeproduction, product mix shifts further toward IC equipment, and operatingleverage strengthens into 2H26.
    Maintain BUY with TP revised to RMB540, based on its three-yearhistorical forward average P/E. We remain bullish on China’s WFE sector,as accelerating domestic substitution and sustained capex from logic andmemory foundries continue to reinforce a strong multi-year growth backdrop.With the most comprehensive WFE portfolio among domestic peers, Naurais positioned to capture this opportunity across a broadening range ofprocess steps. We expect margin expansion to reaccelerate from 2027Eonward, driven by a more favorable mix shift toward higher-marginadvanced-node products and stronger operating leverage as scalecontinues to build.

1Q26 earnings: Brighter than a shooting star

中际旭创(300308)
    Innolight delivered a standout1Q26,with revenue jumping192%YoY/47.3%QoQ to RMB19.5bn(vs.Bloomberg consensus of RMB15.4bn),and net profitsurging262%YoY/56.5%QoQ to RMB5.7bn(vs.RMB4.4bn consensus),bothmarking new quarterly highs.During the period,GPM expanded further to46.1%(vs.44.5%in4Q25),primarily due to improving mix and rising SiPhopenetration.Mgmt.framed the strong quarter not as a one-off outperformancebut as a reflection of sustained demand strength and improved execution,withrobust capacity ramp-up,including Thailand,and resilient raw materialprocurement supporting shipment in a tight S/D backdrop.Maintain BUY withTP adjusted to RMB1,080on28x rollover2027E P/E(prev.28x2026E P/E).
    800G and1.6T ramped up in tandem,with rising SiPho mix furtherlifting margin.Revenue strength was driven by concurrent ramp-up in both800G and1.6T products,indicating that growth is broadening across thecompany’s high-end optical portfolio rather than being tied to a singleproduct inflection.Mgmt.highlighted meaningful contribution from both800G and1.6T shipments in1Q26,with the richer product mix continuing todrive margin higher.Within1.6T,SiPho is expected to account for more thanhalf of shipments this year,reinforcing our view that rising SiPho penetrationshould remain an important structural support to margin.
    NPO is the earlier catalyst,while XPO provides broader deploymentflexibility.Mgmt.indicated NPO has already received explicit customerdemand indications and could enter volume production in2027,with the usecase tied primarily to scale-up architectures.XPO,by contrast,is still inactive customer promotion,but was positioned across both scale-up andscale-out scenarios,with transmission reach of roughly100m to2km,implying broader deployment potential once commercialization visibilityimproves.
    Maintain BUY with TP revised to RMB1,080on rollover28x2027E P/E,supported by an order backlog that now stretches through2026andinto2027(and even beyond).In our view,what stood out this quarter wasnot only the magnitude of the beat,but the quality of execution behind it:Capacity expansion landed on time,supply-chain preparation remainedeffective despite tight upstream conditions,while product mix was movingstructurally upward.We believe this supports a more durable earningsprofile and strengthens confidence that Innolight can capture incrementalupside from future architectural shifts.