Daiwa: Maintains "Buy" rating on LAIFUAL (03952), target price HK$66

Daiwa released a research report maintaining a "Buy" rating on LAIFUAL (03952) and a 12-month target price of HK$66; the company has recently seen a continuous increase in inquiries from humanoid robot original equipment manufacturers (OEMs) in Japan, South Korea, Taiwan, and other regions, and it is expected that some cooperative projects will reach clearer partnerships from Q4 this year to Q1 next year. The bank noted that, apart from Tesla and Figure AI explicitly requiring suppliers to have overseas production capacity, most overseas customers accept Zhejiang Laifu supplying from its domestic Chinese factories, and the company also maintains close contact with European and North American customers. Daiwa mentioned that LAIFUAL's partnership with Japanese company Harmonic Drive Systems (HDS) has provided it with an additional channel into the Japanese market, with the harmonic reducers jointly developed by the two parties already adopted by industrial robot manufacturers such as Yaskawa Electric; the performance of these products is close to HDS's original factory standard, but their price is only one-third to one-half of it. Since HDS has disclosed LAIFUAL's participation in the project to its customers, the bank believes this will bring potential orders and international brand endorsement. The report analyzed that LAIFUAL's average selling price (ASP) for harmonic reducers has fallen from approximately RMB800 in 2023 to RMB500 in the first half of 2026. Management emphasized that this decline did not come from competitive pressure but was caused by a shift in product mix (from larger products used in industrial robots to smaller products for humanoid robots and collaborative robots), which lowered the overall average selling price. At the same time, unit cost also fell from RMB560 in 2023 to RMB350 in the first half of 2026, mainly thanks to improved material formulations, internalization of production processes, and efficiency gains in key components, with processing time for some components shortened from 2 to 3 hours to less than 10 minutes. Overall, management expects to achieve a gross margin of 30% to 35% between 2027 and 2029. The bank also believes that medical surgical robots present a high-end development opportunity for the company; it is currently testing products with the da Vinci surgical system, with each robot requiring approximately 60 harmonic reducers. Although no mass-production orders have been confirmed yet, if certification is successfully obtained, it would not only significantly increase the component value per unit but also help strengthen market confidence in its precision and reliability.