Gf Securities Co.,Ltd. released a research report suggesting investors focus on AI-related structural and undervalued investment opportunities. Key general automation companies have shown marginal improvement in their year-on-year revenue and net profit attributable to shareholders data since 2025. Their subsequent operational performance is expected to continue improving alongside the macroeconomic environment. The firm highlights structural beneficiaries of AI, recommending prioritizing targets with high exposure to AI and new energy, such as industrial control, some machine tools, and robotics. It also advises attention to undervalued sectors with low historical price-to-earnings (P/E) percentiles: injection molding machines (12.2x P/E, five-year percentile 31.02%) and forklifts (13.6x P/E, five-year percentile 71.94%). The main points from GF SEC are as follows.
The Producer Price Index (PPI) has turned positive year-on-year for two consecutive months, signaling a potential turning point in the current downturn cycle starting from Q4 2025, with various macro indicators showing sequential improvement. The year-on-year PPI data turning positive in March for the first time in a three-year downturn holds significant macroeconomic meaning, and the April year-on-year data showed a notable sequential increase. Concurrently, there are signs of inventory replenishment for finished goods, though its sustainability requires further observation. The downturn in macro credit data has lasted over 30 months, but the year-on-year growth rate has shown signs of sequential improvement. The year-on-year growth rates for total profits and cumulative operating revenue of industrial enterprises have been rising sequentially since December 2025, recovering to 15.8% and 5.0% respectively by March 2026. On the overseas demand side, PMI and PPI data from the US, Japan, and Germany show signs of a turning point, with AI-related segments within key commodity exports presenting structural bright spots.
The current PPI increase is primarily driven by upstream resources; subsequent attention is needed on the sustainability of downstream transmission. The current PPI boost mainly relies on upstream resource-related sub-sectors, while the year-on-year PPI for most midstream manufacturing remains in negative territory. In May, major excavator manufacturers announced price increases for their products, indicating signs of upstream resource price pressures transmitting downstream. If general equipment companies continue to signal price hikes, the transmission of PPI downstream could sustain the recovery.
Mid-level data shows structural divergence trends strongly correlated with the high growth of the AI industry. Against the backdrop of a weak macroeconomic recovery in 2025, performance within the manufacturing sector showed structural divergence. Power equipment, electronics, light industrial manufacturing, and non-ferrous metals were among the few sub-sectors that achieved continuous year-on-year expansion in both revenue and capital expenditure (CAPEX) during Q4 2025 and Q1 2026. The electronics sector directly benefits from the high demand for AI computing power, optical modules, high-speed connectors, and high-end PCBs, serving as the most direct hardware carrier for the AI industry. Power equipment accommodates the massive electricity demand from AI data centers. Non-ferrous metals, as upstream basic materials, see widespread use of copper, tin, silver, and tungsten in AI servers.
Risk warnings include fluctuations in demand for mechanical products due to macroeconomic changes; rising raw material prices suppressing corporate profitability; exchange rate fluctuations affecting profits; and potential underperformance in capital expenditure within the artificial intelligence industry.
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