HSBC Research downgraded LK TECH's rating to "Reduce," as the market is overly optimistic about the contribution of humanoid robots

HSBC Global Research pointed out that LK TECH (00558.HK) has seen its stock price rise by 98% since the beginning of this month, as the company announced a strategic partnership for the development of magnesium alloy die-casting solutions for humanoid robots. The firm believes that the market's expectations for the revenue contribution from humanoid robots are overly optimistic, and that automotive customers still have weak demand for aluminum die-casting machines and plastic "injection molding" machines.

The firm expects limited contribution from magnesium alloy die-casting solutions in the fiscal years 2026 to 2027, based on the fact that humanoid robots are still exploring different hardware designs and materials, making it unlikely to enter mass production in the short term. Additionally, the related artificial intelligence requires more training to achieve large-scale application. The firm estimates global humanoid robot deliveries to be 16,000 and 31,000 units in the next two years, with downside risks, based on foreign media reports that Tesla halted humanoid robot production last month to address some design challenges, with Tesla's original target being the delivery of 5,000 units this year.

The firm also noted that LK TECH is not the only company capable of producing magnesium alloy die-casting machines, with competitors including Haitian International and Yizumi (300415.SZ). In terms of traditional business, LK TECH's aluminum die-casting machines are expected to continue facing pressure this fiscal year due to slowing penetration growth, while plastic "injection molding" machines are also affected by high base effects and uncertainties related to tariffs.

The firm expects LK TECH's earnings per share to grow by only 5% in the fiscal year 2026, raising the company's target price from HKD 3 to HKD 3.7, and downgrading the rating from "Hold" to "Reduce."