Citi: Leader Drive expands robot reducer capacity; in-house machine tools could lower equipment costs

How will the humanoid robot business change the shipment mix?

Management plans to raise the share of humanoid robot reducers in total shipments from about 20% in 2025 to about 50% in 2026.
The company expects total reducer shipments of 700 thousand–800 thousand units in 2026, including 300 thousand–600 thousand units for humanoid robots; shipments in the latter category were about 100 thousand units in 2025.
To support expansion, the company plans to increase monthly reducer capacity from the current 90 thousand units to 120 thousand units by the end of 2026, and further to 160 thousand–180 thousand units in 2027.

Management said the current average selling price of reducers is 800–900 yuan per unit, down from about 1000 yuan a year earlier. Reasons include volume discounts for major customers and the smaller reducers required by humanoid and collaborative robots.
Labor costs are higher during the ongoing capacity expansion, so management does not expect gross margins to improve year on year in the near term. Higher shipment volumes are occurring alongside lower unit selling prices and rising costs.

The company uses its own CNC milling and grinding machines to produce humanoid robot components. It can also manufacture CNC systems and rotary tables in-house to ensure machine-tool precision.
Citi believes in-house equipment can significantly reduce equipment costs and potentially lessen the impact of supply constraints imposed by foreign equipment suppliers. This is also one reason the bank believes the company trades at a higher price-to-earnings ratio than its peers. The company will also consider selling CNC systems and grinding machines to external customers in the future.

The company is jointly developing reducers with US humanoid robot manufacturers and others, including Figure AI, Agility and OpenAI. Citi believes a potential partnership with SKF could also strengthen its research and development capabilities in bearings and materials for embodied intelligence; the company hopes eventually to become a provider of integrated solutions for embodied intelligence drive systems.
Citi maintained its Buy rating and 496 yuan target price, valuing the company at 322 times expected 2027 earnings, reflecting its assessment of the visibility of the humanoid and industrial robot businesses. Downside factors listed by the bank include slower automation market growth, intensifying competition, rising raw material costs, and contributions from new applications such as humanoid robots falling short of expectations.