CICC has issued a research report initiating coverage on LAIFUAL (HKEX: 03952) with an "Outperform" rating and a target price of HK$58, implying 33% upside potential.

The brokerage forecasts the company's revenue to reach RMB 420 million in 2026 and RMB 698 million in 2027, representing year-on-year growth of 60.8% and 66.3%, respectively. The company is a leading domestic manufacturer of harmonic reducers. Potential catalysts include faster-than-expected progress in capacity ramp-up and stronger-than-anticipated robot customer orders.

Dual Improvement in Harmonic Reducer Market Share and Profitability

The company has focused on harmonic reducers for over a decade. According to CIC data, its harmonic reducer shipments ranked second in China in 2025. The company has developed independent manufacturing capabilities in core areas such as heat treatment and bearings. In the first half of 2026, LAIFUAL's core reducer business gross margin rose 8.9 percentage points year-on-year to 29.6%, reflecting improved profitability.

High-Growth Industry Combined with Capacity Release

According to China Insights Consultancy, China's robot harmonic reducer market is expected to achieve a compound annual growth rate of 59.8% from 2025 to 2030. In the first half of 2026, the company's capacity utilization rate reached 95%. Since its listing, the company has continued to advance equipment and production facility expansion. The brokerage expects the gradual release of new capacity to further capture the industry's high-growth demand and amplify revenue elasticity.

Vertical Manufacturing Advantages and Fast Delivery Efficiency

The company has established a vertically integrated manufacturing system covering heat treatment, precision machining, gear processing, and bearing manufacturing. It also possesses flexible production and rapid non-standard response capabilities, enabling it to serve both large-scale standardized products and the continuously evolving customization needs of robot customers. The future new production base will replicate the existing core processes and production line systems. The brokerage believes the company is poised to maintain cost, quality, and delivery efficiency while expanding capacity, further strengthening its manufacturing advantages as scale grows.

More Optimistic on Profitability

CICC noted that the market is concerned about price declines in the harmonic reducer industry and the company's historically weak profitability, but the brokerage holds a more optimistic view. In the first half of 2026, the company's core reducer business gross margin improved significantly. The brokerage believes that with capacity utilization remaining high and one-off expenses fading, the company's profitability is expected to continue improving.