According to the Zhitong Finance APP, Huachuang Securities released a research report stating that the industrial control industry is an important part of the automation and intelligent upgrading of the manufacturing sector. After more than two years of adjustment, the manufacturing industry has shown signs of recovery as it enters 2025; domestic industrial control brands are actively exploring demand for import substitution while accelerating their layout in overseas markets to step up globalization; in addition, humanoid robots are opening up incremental scenarios for the industrial control industry and may become the main driving force for the growth of the industrial control industry in the next decade. Based on the above, the firm believes that the industrial control industry is primarily characterized by growth, with cyclical attributes as a supplement, and gives the industrial control industry a "recommended" rating.

The main points of Huachuang Securities are as follows:

China's automation market size has seen a slight decline for two consecutive years, reaching 285.9 billion yuan in 2024

Looking at the quarterly data, the year-on-year growth rate of the OEM market has continued to narrow. Considering the destocking by distributors in 2023-2024, the support from fiscal and monetary policies since 2024, and the promotion of equipment renewal policies, the OEM market is expected to enter an upward phase in 2025, driving demand in the industrial control market. The project-based market has experienced three consecutive years of positive growth from 2021 to 2023, but the growth rate has dropped to 0.1% in 2024. Given the weak investment in the metallurgy and petrochemical industries, which have a significant share in the process industry, it is expected that the project-based market will face pressure in 2025.

The overseas market is beginning to show potential, and domestic brands have great opportunities

With the overseas expansion of downstream manufacturing capacity, domestic industrial control brands are accelerating their overseas layout through "borrowing ships to go to sea" and "product line going overseas." Regionally, industrial control companies are expanding from near to far, from emerging to mature markets. Adapting to local conditions is the best way to enter overseas markets. Inovance has been deeply cultivating the Indian textile market for over a decade and has the capability to respond to service requests at the level of tens of thousands; Veichi has entered the Southeast Asian and Middle Eastern markets through photovoltaic water pumping product solutions.

The potential for domestic substitution varies by product: PLCs, frequency converters, and servos

In 2024, the market shares of the top five foreign brands in China's medium and large PLCs, small PLCs, low and medium voltage frequency converters, medium and high voltage frequency converters, and general servos are 86.2%, 57.1%, 46.4%, 41.5%, and 31.1%, respectively. As the core of the control layer, PLCs have high technical barriers and strong process characteristics, making them necessary for import substitution and domestic production; the share of domestic frequency converters still has significant room for improvement in the process industry; servos have breakthrough potential in high-speed, high-precision, and high-response high-end application scenarios.

Humanoid robots open new application scenarios for industrial control

The value of joint modules and dexterous hands in humanoid robots is significant, and the core components that make up joint modules and dexterous hands, such as frameless motors, hollow cup/BLDC motors, drivers, and position sensors, are mostly within the technical and product capabilities of industrial control companies. According to the firm's calculations, the market space for the drive control motor system corresponding to the production of 1 million units of Optimus is 33.2 billion yuan. Domestic industrial control manufacturers are seizing the golden opportunity of humanoid robots, with many actively laying out their strategies.

Key Companies

Key recommendations include Inovance Technology, as the general automation recovery is on the way, and the electric vehicle business is entering a profit release period; and Xinjie Electric, where the high barriers of PLCs create a profit ballast, as the company actively enhances its solution capabilities and major customer strategies It is highly recommended to focus on Veichi, which has shown significant results in overseas expansion and is actively laying out the humanoid robot sector. It is suggested to pay attention to Leadshine, INVT, Hechuan Technology, Gokong Technology, and Zhongchen Technology, among others.

Risk Warning: Overseas market expansion may fall short of expectations; the pace of import substitution may be slower than expected; the progress of the humanoid robot industry may not meet expectations; the recovery of domestic manufacturing may be less than anticipated