How does the IPO withdrawal change the robotics business strategy?

  • After Huan Dong Technology withdrew its IPO application in September, Shuanghuan Driveline’s management expects the group to strengthen integration across research and development, sales, and manufacturing in its robotics business, concentrating resources more effectively.
  • As product requirements for noise, precision, and reliability rise, management believes the group’s decades of gear manufacturing experience and global production capacity will support its competitiveness.
  • Shuanghuan Driveline plans to gradually increase its stake in Huan Dong Technology from the 61.29% holding it had in June 2026; Morgan Stanley believes the move could add value.

Where are the overseas opportunities for coaxial gearboxes?

  • Management said the company leads the domestic market in coaxial gearboxes, has an ample pipeline of projects, and sees new opportunities from overseas automakers and tier-one suppliers.
  • Cooperation with overseas customers is expanding from components to integrated modules. If the company can provide more modules, its content value per vehicle could rise; however, slower-than-expected market share gains and weaker overseas demand would affect this growth trajectory.

How much revenue is overseas capacity expansion generating now?

  • The Hungarian plant generated revenue of 300 million to 400 million yuan in the first three quarters of 2026, with a net margin of approximately 2%; management expects full-year revenue of 400 million to 500 million yuan.
  • The company has purchased two additional plots of land in Vietnam to expand capacity. Morgan Stanley believes this will help mitigate tariff and regional supply chain risks; improving European demand for new energy vehicles and stricter EU localization requirements could also support overseas sales.

How does the institution value the company?

  • Management is targeting revenue growth of less than 20% but more than 10% in 2027 and has provided no net profit guidance. Morgan Stanley has an Overweight rating on Shuanghuan Driveline, with a price target of 46 yuan, approximately 12% above the 26 October 2026 closing price of 41 yuan.
  • The bank uses a sum-of-the-parts valuation: the core business is valued at 25 times forecast 2026 earnings; the humanoid robotics business is valued at 6 times sales of 1.1 billion yuan when global humanoid robot sales reach 1 million units. The bank believes the adoption cycle for new reducers is longer, but their growth potential is greater.
  • Progress in humanoid robot reducers, domestic competition in gears and actuators, and changes in overseas demand could all affect the growth underpinning the valuation.