CICC: The overall growth of the industrial control sector shows a weak recovery trend, and the pace of going overseas is further accelerating

According to the report released by China International Capital Corporation (CICC), during the first half of 2025 (1H25), the overall revenue of the industrial control sector increased by 13.1% year-on-year, with a gross profit margin of approximately 28.1%, remaining stable compared to 2024. Domestic brands are accelerating the pace of domestic substitution due to strong product capabilities and cost performance. As the competitiveness of domestic products continues to improve, companies are seeing a significant increase in overseas order growth, with the proportion of overseas revenue continuously rising. Driven by high-margin overseas businesses, companies are accelerating their international expansion through structural measures, such as establishing subsidiaries and enhancing overseas production capacity, to expedite their layout in emerging markets with strong automation demand, including Southeast Asia, India, the Middle East, Russia, and South America. CICC's main viewpoints are as follows: 1H25 industrial control sector performance meets expectations The overall growth of the industrial control sector shows a weak recovery trend. According to MIR, the market size of the industrial automation industry increased by 0.52% year-on-year in 1H25, with the OEM market rising by 1.98% year-on-year, while the project-based market declined by 0.31%. According to CICC's statistics, during 1H25, the overall revenue of the sector increased by 13.1% year-on-year, with a gross profit margin of approximately 28.1%, remaining stable compared to 2024. Domestic brands are accelerating the pace of domestic substitution due to strong product capabilities and cost performance. The market is generally in a weak recovery state, actively reducing inventory In 1H25, the overall inventory level has returned to normal, and the market is showing a weak growth trend. For domestic manufacturers, domestic brands performed well in 1H25, with the continuous promotion of domestic substitution for major products, overall outperforming foreign brands. Inovance's revenue growth is strong, with the market share of core products further increasing, maintaining a leading position. The second-tier products continue to grow, with MIR data showing that in 1H25, Xinjie Electric's small PLCs grew by 11.7% year-on-year, and the servo sector of Leadshine continued to maintain high growth, increasing by 31.1% year-on-year, further accelerating domestic substitution. Significant growth in overseas orders, with gross profit margins significantly higher than domestic, accelerating the pace of industrial control going overseas As the competitiveness of domestic products continues to improve, companies are seeing a significant increase in overseas order growth, with the proportion of overseas revenue continuously rising. Driven by high-margin overseas businesses, companies are accelerating their international expansion through structural measures, such as establishing subsidiaries and enhancing overseas production capacity, to expedite their layout in emerging markets with strong automation demand, including Southeast Asia, India, the Middle East, Russia, and South America. Significant growth in AIDC and humanoid robot sectors, companies continue to increase investment in layout AIDC: In 1H25, companies related to AIDC saw significant revenue growth, with domestic and overseas data center projects being implemented, and server power supplies and uninterruptible power supplies expected to contribute significantly to performance. 2) Humanoid robots: Companies are increasing their investment in the research and development of technologies such as frameless torque motors, encoders, and dexterous hands, while integrating embodied intelligence and AI large models, actively laying out for the future. Related targets AIDC: Megmeet (002851.SZ), Kehua Data (002335.SZ), Keda Power (002518.SZ); related companies also include Zhongheng Electric (002364.SZ), Keta Power (300153.SZ), Weichai Heavy Machinery (000880.SZ); Humanoid Robots: Inovance (300124.SZ), Weichuang Electric (688698.SH), Reecy Intelligent (002979.SZ), xinjie Electric (603416.SZ), related companies also include Delta Electronics (00179) and others. Risk Factors Downstream demand is lower than expected, intensified competition, new product layout is not as expected, tariff risks