Institutions are flocking to conduct research on listed companies in the machine tool sector

Among the hot topics in the capital markets, one sector that has attracted particular attention is that of machine tools. Data indicates that since the beginning of September, more than a hundred institutional investors have conducted research on listed companies such as Kede CNC, Huaneng CNC and Rifa Precision Machinery. The institutions have focused their attention on these companies’ strategic positioning in the field of high-end equipment manufacturing.

Intensive institutional research

According to the data, since September, a total of 133 institutions have conducted research on 15 listed companies in the machine tool sector. Among these, Kede CNC, Rifa Precision Machinery and Huaneng CNC have attracted widespread attention from institutions, with more than 20 institutions participating in the respective research.

On 14 October, Kede CNC was visited by three research institutions. In response, Kede CNC stated that the company boasts a diverse product range, with applications across the automotive, machinery, energy and cutting tool sectors. On 10 October, Huaneng CNC was visited by nine research institutions. the company possesses core CNC system technologies and has identified machine tool CNC systems, industrial robots and smart production lines, and new energy vehicle support services as its three main business directions. The company also indicated that future earnings growth would primarily stem from the CNC systems, industrial robots and smart production lines business segments. During the institutional research visit, Zhehai Deman indicated that its downstream clients span sectors including the automotive components and construction machinery industries, with the automotive components business accounting for the largest share, at approximately 50–60 per cent.

step up research and development efforts

Institutions are paying particular attention to machine tool companies operating in the high-end sectorCNC machine toolsthe technical standards and product portfolio within this sector, High-end CNC machine tools are widely used in sectors such as automotive manufacturing, rail transport and aerospace. Kaiyuan Securities holds the view that the number of axes on a CNC machine tool is a key indicator of its technological advancement; five-axis CNC systems are particularly challenging to develop and involve high R&D costs.

During a meeting with institutional investors, Huaneng CNC revealed that it holds full independent intellectual property rights for its multi-axis high-end CNC systems and will continue to uphold independent innovation, adhering to the two main development strategies of “reaching for the sky—intelligent high-end CNC systems” and “grounding in reality—intelligent mainstream CNC systems”, whilst enhancing competitiveness in terms of technology, quality and service.

Kode CNC states that its five-axis CNC machine tools have low after-sales service costs and offer excellent value for money. These machines can be used to machine automotive engine blocks, as well as automotive moulds and components such as battery and motor housings for new energy vehicles.

Genesis claims that the company has made substantial progress in the research and development of high-end machine tools, such as five-axis machining centres. Since the start of this year, it has completed the development of several five-axis machine tools, and a number of others are currently in the development phase.

Companies are expanding their production capacity

According to forecasts by the China Business Industry Research Institute, China’s CNC machine tool industry is expected to reach a market size of 405.6 billion yuan by 2025. Industry insiders have indicated that new energy vehicles have opened up vast market opportunities for CNC machine tools, as components such as electric motors, electronic control units and batteries all require customised machine tools for their manufacture.

According to Kode CNC, “there is strong demand in the market for five-axis CNC machine tools”. During the first half of this year, the company procured a flexible manufacturing line for horizontal machining centres, as well as a gantry production line, and established a production line for five-axis CNC machine tools. This production line will commence deliveries in 2023, with an annual production capacity exceeding 500 units. Currently, the average delivery lead time for the company’s flagship products—five-axis vertical machining centres and horizontal machining centres—is approximately four months. With the expansion of production capacity, the company has commenced pre-production runs for certain models, and order delivery lead times are showing a trend towards shortening.

Qinchuan Machine Tool has indicated that, in the second half of this year, the company will further strengthen its competitive edge in the mid-to-high-end market for gear cutting machines, thread grinding machines, external cylindrical grinding machines and five-axis machine tools. It will also accelerate progress on the “Qinchuangyuan·Qinchuan Group High-End Machine Tool Innovation Base Project”, aiming to complete the main structure of the first phase of the project by the end of 2022. In addition, the company has initiated a refinancing exercise, aiming to raise a total of no more than 1.23 billion yuan, which will be used to increase investment in areas such as industrial machine tools.