China Industrials Mid-year Outlook: Selective Stock Picks amid Strong Capex Outlook

Research evidence excerpt

China Industrials Mid-year Outlook: Selective Stock Picks amid Strong Capex Outlook

Idea

July 6, 2026 07:58 PM GMT

Morgan Stanley Asia Limited+MChina Industrials | Asia Pacific Sheng Zhong

Equity Analyst

China Industrials Mid-year Sheng.Zhong@morganstanley.comChelsea Wang +852 2239-7821

Jinlin.Wang@morganstanley.com +852 2239-1118

Outlook: Selective Stock Picks Carlos Chai

Research Associate

Carlos.Chai@morganstanley.com +852 3963-3180

amid Strong Capex Outlook

Capex should remain broadly strong across the sub-sectors we

cover in 2H26. After the divergent stock performance in 1H26,

we are selective on stocks based not only on sales and order China Industrials

momentum, but also on profitability, catalysts, and valuation. Asia Pacific

Industry View In-Line

Theme 1: AI infrastructure structural growth intact; we prefer the “picks &

Exhibit 1 : Revision summaryshovels”.

Trading Price Target

Company Ticker Rating

The global AI capex cycle remains strong and should sustain into 2027. Rapid Curr Old New

Wuxi Lead 300450.SZ OW RMB 87.0 54.0

technology iteration and capacity expansion are accelerating, creating strong Hongfa 600885.SS OW RMB 35.0 43.0

Bochu 688188.SS OW RMB 169.0 122.0

demand for necessary power and manufacturing equipment. We favour companies Envicool 002837.SZ OW RMB 118.0 101.0

where AI exposure drives sustained earnings growth. LeaderdriveGeekplus 688017.SS2590.HK OWOW RMBHKD 464.029.0 631.020.0

Han's Laser 002008.SZ OW RMB 118.0 188.0

Stock ideas: Weichai - H is the best play in our coverage, with strong growth at a Iray 688301.SS OW RMB 78.6 140.0

Sinotruk 3808.HK EW HKD 36.0 45.0

compelling valuation of 20x/15x 2026/27 PE. AIDC power generator net profit Estun 002747.SZ UW RMB 19.0 29.6