Equity Research Initiation: Zhuozhao Dispensing (920026.BJ)

Date: April 08, 2026
Sector: Mechanical Equipment / Specialized Equipment
Exchange: Beijing Stock Exchange (BSE)
Rating: Outperform (Initiation)
Current Price: CNY 33.40
Target Price: Implied Upside based on Peer Valuation Multiples
Market Cap: CNY 2.74 Billion

Executive Summary

Zhuozhao Dispensing (920026.BJ) stands as a pivotal supplier of high-precision dispensing equipment within the Apple supply chain, serving key EMS partners such as Luxshare Precision and Foxconn. Following a period of strategic adjustment and market consolidation in 2024, the company is poised for a significant earnings inflection in 2025. We initiate coverage with an Outperform rating, driven by a robust recovery in core consumer electronics demand, successful penetration into high-growth non-Apple sectors (specifically Meta AI wearables, New Energy Vehicles, and Photovoltaics), and the commencement of revenue contributions from its newly established visual inspection business line.

Our analysis indicates that Zhuozhao Dispensing has successfully transitioned from a pure-play Apple dependency model to a diversified technology platform provider. The company’s core competency lies in its proprietary fluid control technologies, which have achieved technical parity with global leaders such as Nordson (US) and Musashi Engineering (Japan) in critical parameters including precision, consistency, and viscosity handling. This technological maturity has enabled the company to secure million-level RMB orders in the emerging Meta AI glasses sector and gain vendor status with industry giants like CATL and Samsung Electronics.

Financially, we project a dramatic turnaround in profitability. Based on the company’s 2025 performance guidance and our proprietary modeling, we forecast Net Profit Attributable to Shareholders to reach CNY 52 million in 2025 (a year-over-year increase of ~350%), followed by steady growth to CNY 61 million in 2026 and CNY 75 million in 2027. At the current share price of CNY 33.40, the stock trades at approximately 53x 2025E P/E and 45x 2026E P/E. While these multiples appear elevated relative to historical averages, they are justified by the high growth trajectory, the scarcity value of high-end domestic substitution in precision dispensing, and the favorable valuation gap compared to peer companies in the A-share market (average 2026E P/E of 63x for selected peers).

The investment thesis is underpinned by three primary pillars:
1. Core Business Resilience & Recovery: The stabilization and growth of the Apple ecosystem, coupled with the introduction of new product cycles (including MR/AR devices), drive immediate revenue visibility.
2. Strategic Diversification Success: The breakthrough in Meta AI glasses and entry into the EV battery and PV supply chains de-risks the customer concentration profile and opens substantial Total Addressable Market (TAM) expansion opportunities.
3. Technological Moat & Import Substitution: Zhuozhao’s ability to offer customized, high-performance solutions at a competitive cost structure positions it to capture market share from foreign incumbents in the high-end segment, a trend supported by broader national industrial policies favoring domestic semiconductor and advanced manufacturing equipment.

Risks to this thesis include persistent customer concentration, intensifying competition in the dispensing equipment sector, and macroeconomic volatility affecting downstream capital expenditure. However, given the company’s strong order book visibility for 2025 and its strategic positioning in high-growth verticals, we believe the risk-reward profile is attractive for institutional investors seeking exposure to the advanced manufacturing and AI hardware supply chains.

Key Takeaways

1. Industry Tailwinds: A CNY 100 Billion Market with High-End Substitution Potential

The Chinese dispensing machine industry is undergoing a structural transformation, driven by the dual forces of downstream demand expansion and technological upgrading. According to data from LeadLeo Research Institute, the market size for dispensing machines in China grew from CNY 26.27 billion in 2020 to CNY 44.26 billion in 2024, representing a Compound Annual Growth Rate (CAGR) of 15.02%. Looking forward, the momentum is expected to accelerate. We project the market to expand from CNY 52.23 billion in 2025 to CNY 101.25 billion by 2029, implying a robust CAGR of 18.00% for the 2025–2029 period.

Structural Drivers of Growth

• Consumer Electronics Iteration: Despite saturation in smartphone shipments, the rapid iteration of wearable devices (TWS earbuds, smartwatches, AR/VR headsets) and the integration of AI features into edge devices require increasingly complex assembly processes. Precision dispensing is critical for waterproofing, structural bonding, and thermal management in these compact, high-density modules.
• New Energy Vehicle (NEV) Penetration: The automotive industry is shifting towards electrification and intelligence. In 2025, China’s NEV sales reached 16.49 million units, a 28.2% YoY increase. The adoption of 800V high-voltage platforms and solid-state battery technologies necessitates advanced dispensing applications for battery pack sealing, motor insulation, and chip encapsulation. Each vehicle utilizes significantly more adhesive and sealing materials than traditional ICE vehicles, directly boosting demand for automated dispensing equipment.
• Photovoltaic (PV) & Semiconductor Expansion: The global push for renewable energy and semiconductor self-sufficiency creates sustained demand. PV module manufacturing requires precise sealing for junction boxes and frames to ensure longevity against environmental stressors. Similarly, semiconductor packaging, particularly in wafer-level packaging and advanced IC assembly, relies on ultra-high-precision dispensing for underfilling and encapsulation.

The Import Substitution Opportunity

Historically, the high-end segment of the Chinese dispensing market was monopolized by foreign entities, primarily Nordson Corporation (US) and Musashi Engineering (Japan). These companies held dominance due to their superior control algorithms, high-precision visual servo systems, and brand reputation. Domestic players were largely confined to low-value-added integration roles.

However, the landscape is shifting. Leading Chinese manufacturers, including Zhuozhao Dispensing, Anda Intelligent, and Kaige Precision, have made significant strides in core technologies. While gaps remain in areas such as advanced motion control algorithms and high-speed visual feedback loops, domestic firms have achieved parity in many critical performance metrics. The "high-end domestic substitution" narrative is no longer theoretical but operational, driven by:
1. Cost Efficiency: Domestic equipment offers a compelling total cost of ownership (TCO) advantage.
2. Service Responsiveness: Local providers offer faster customization and on-site support, crucial for the rapid product cycles of consumer electronics.
3. Supply Chain Security: Geopolitical tensions and national policy directives encourage downstream manufacturers to qualify domestic suppliers for critical production equipment.

We estimate that the addressable market for high-end domestic substitution remains vast, with foreign brands still holding a majority share in the most demanding applications (e.g., semiconductor front-end, high-speed micro-dispensing). Zhuozhao’s ability to compete in this tier is a key validator of its long-term growth potential.

2. Company Profile: From Apple Supplier to Multi-Sector Technology Platform

Zhuozhao Dispensing specializes in the research, development, production, and sales of intelligent dispensing equipment and core components. The company’s product portfolio is anchored by two main categories:
1. Dispensing Valves & Core Components: Including screw valves, piezoelectric jetting valves, and spray valves. These are the "heart" of the dispensing system, determining precision, speed, and fluid compatibility.
2. Intelligent Dispensing Equipment: Integrated systems comprising dispensing platforms, motion control systems, valves, and auxiliary devices. These are sold as turnkey solutions tailored to specific customer production lines.

Business Model and Customer Structure

The company operates primarily on a direct sales model, engaging directly with terminal customers (such as Apple) and major Electronics Manufacturing Services (EMS) providers. A smaller portion of sales occurs through traders, typically where long-standing relationships between traders and end-users exist. The business is characterized by a high degree of customization. Clients specify rigorous requirements regarding dispensing volume accuracy, positioning precision, axis speed, and programming interfaces. Zhuozhao’s engineering team works closely with clients during the NPI (New Product Introduction) phase to co-develop solutions, creating high switching costs and sticky relationships.

Customer Concentration:
Historically, Zhuozhao has exhibited high customer concentration, a common trait among suppliers deeply embedded in the Apple supply chain.
* 2022–2024 Trend: The top five customers accounted for 80.83%, 78.22%, and 56.44% of total revenue, respectively.
* Key Partners: Foxconn, Luxshare Precision, Goertek, and other Tier-1 EMS providers.
* Mitigation Strategy: The recent decline in concentration percentage (to 56.44% in 2024) signals the early success of its diversification strategy into non-Apple sectors (Meta, CATL, Samsung). While concentration remains a risk factor, the absolute revenue base is expanding, and the quality of the customer base is improving with the addition of industrial and automotive giants.

Financial Turnaround: 2025 Performance Inflection

After a challenging 2024, where revenue declined by 52.35% YoY to CNY 125 million and the company recorded a net loss of CNY 21 million, 2025 marks a decisive recovery.

2025 Performance Forecast (Based on Company Guidance & Analyst Estimates):
* Revenue: CNY 379 million (+203% YoY).
* Net Profit Attributable to Shareholders: CNY 51.89 million (+350% YoY).
* Deducted Non-Recurring Net Profit: CNY 51.46 million (+318% YoY).

Drivers of the 2025 Rebound:
1. Project Acceptance: Successful completion and acceptance of legacy projects contributed over CNY 10 million in revenue and profit.
2. Core Apple Business Stability: The foundational business with Apple EMS partners remained resilient, providing a stable cash flow baseline.
3. New Business Monetization: The strategic bet on non-Apple markets began to pay off. Specifically, the supply of precision dispensing valves and equipment for Meta AI Glasses generated over CNY 10 million in revenue and profit.
4. Consolidation Impact: The inclusion of Guangdong Pusen Plastic Technology Co., Ltd. (consolidated as of Jan 31, 2025) added incremental revenue and synergies through resource complementarity.

3. Competitive Moat: Technological Parity with Global Leaders

Zhuozhao’s competitive advantage is rooted in its deep intellectual property (IP) portfolio and its ability to replicate the performance of international benchmarks at a competitive cost. As of 2024, the company holds:
* 44 Invention Patents: Focused on core technologies like fluid control in dispensing valves and multi-axis collaborative control.
* 199 Utility Model Patents: Covering equipment structure optimization and process adaptation.
* 11 Software Copyrights & 10 Design Patents.

This IP framework supports a "Full-Chain" capability, from core component design to system integration and application process development.

Technical Benchmarking: Zhuozhao vs. Global Peers

To validate the company’s claim of high-end competitiveness, we analyze key technical parameters against industry leaders.

Table 1: Dispensing Valve Technical Comparison

Source: Company Prospectus, Huayuan Securities Institute. Note: Data reflects specifications at time of publication.

Analysis:
* Precision: Zhuozhao’s ZJET2XX piezo jetting valve achieves a minimum dot diameter of 0.15mm with a consistency error of ±1%, matching or exceeding the specifications of competitors like Kaige Precision and Asymtek.
* Viscosity Handling: The SPEN X50 single-liquid screw valve can handle viscosities up to 2,000,000 ps, demonstrating superior capability in handling high-viscosity adhesives (common in structural bonding and potting) compared to many standard jetting valves.
* Speed: The 1,000 Hz operating frequency of its piezo valves places it in the top tier of high-speed dispensing solutions, essential for high-volume consumer electronics manufacturing.

Table 2: Dispensing Equipment Performance Comparison

Source: Company Prospectus, Huayuan Securities Institute.

Analysis:
* Accuracy: The Line-6000 model achieves a repeatability of ±0.005mm, which is superior to many competing models and comparable to high-end Musashi systems. This level of precision is critical for miniaturized components in smartphones and wearables.
* Speed & Dynamics: With a max speed of 1500 mm/s and acceleration of 1.5g, Zhuozhao’s equipment matches the dynamic performance of leading competitors like Asymtek and Anda Intelligent, ensuring it can meet the throughput requirements of mass production lines.

These technical benchmarks confirm that Zhuozhao is no longer a "low-cost alternative" but a technically viable substitute for high-end foreign equipment. This validates its ability to command higher margins and secure contracts in sensitive, high-precision applications.

4. Strategic Growth Engines: Beyond the Apple Ecosystem

While the Apple supply chain remains the cash cow, Zhuozhao’s future valuation multiple will be determined by its success in diversifying into high-growth, non-consumer electronics sectors. The company has executed a "Vertical Deepening, Horizontal Expansion" strategy.

A. The Meta AI Glasses Breakthrough

The emergence of AI-powered wearable devices represents the next frontier in consumer electronics. In August 2025, Zhuozhao disclosed that it had secured a multi-million RMB mass production order for dispensing valves and equipment used in Meta AI Glasses.

• Significance: This is not merely a new customer win; it is a validation of Zhuozhao’s technology in a cutting-edge, high-visibility product category. AI glasses require extreme miniaturization and precise adhesive application for optical modules, sensors, and battery integration.
• Execution: The company supplies both the core dispensing valves and the integrated equipment, working through integrators and contract manufacturers. The smooth delivery and mass production status indicate that Zhuozhao has successfully navigated the rigorous qualification processes of a global tech giant outside the Apple ecosystem.
• Future Implication: As the AR/VR/MR market matures (with contributions from Apple’s Vision Pro lineage and Meta’s Ray-Ban series), this segment could become a significant revenue pillar. Zhuozhao’s early mover advantage here positions it well for future iterations.

B. New Energy Vehicle (NEV) & Battery Supply Chain

The automotive sector offers a much larger TAM than consumer electronics, albeit with longer qualification cycles. Zhuozhao has made tangible progress:
* CATL Supplier Status: The company has successfully entered the supplier system of Contemporary Amperex Technology Co. Limited (CATL), the global leader in EV batteries. This is a prestigious credential that opens doors to other battery manufacturers and OEMs.
* Application Areas:
* Battery Pack Sealing: Ensuring thermal runaway protection and environmental sealing.
* Motor Insulation: Precision coating for hairpin motors and stators.
* Electronic Control Units (ECU): Potting and conformal coating for power electronics.
* Technology Fit: The company’s high-viscosity screw valves and dual-component mixing systems are specifically suited for the thick thermal interface materials (TIMs) and structural adhesives used in EVs.

C. Photovoltaic (PV) & Semiconductor

• PV Sector: Zhuozhao has completed prototype verification for PV core dispensing components. These are used for sealing junction boxes and framing solar panels. With China targeting 3000GW of PV capacity by 2035, the demand for automated, high-reliability sealing equipment is robust. The company’s focus on reducing glue waste and improving consistency aligns with the PV industry’s relentless drive for cost reduction (LCOE).
• Semiconductor: While still in the early stages, the company is developing solutions for wafer-level packaging and chip encapsulation. The acquisition of vendor codes from Samsung Electronics further bolsters its credibility in the broader electronics supply chain, potentially serving as a bridge to more advanced semiconductor packaging roles.

D. Visual Inspection: A New Revenue Stream

In 2024, Zhuozhao strategically expanded into Visual Inspection Equipment, leveraging its expertise in precision motion control and machine vision.
* Product Offerings:
1. Dimensional Measurement: Verifying length, width, thickness, flatness, and contour of parts (e.g., steel brackets in laptop touchpads).
2. Appearance Inspection: Detecting scratches, dents, discoloration, and coating defects (e.g., smartphone screen镀膜 missing).
* Performance: In H1 2025, this new business segment secured and delivered multi-million RMB mass production orders. This demonstrates the company’s ability to cross-sell to its existing customer base, offering a "Dispensing + Inspection" integrated solution that enhances production line efficiency and quality control.

5. Capacity Expansion and R&D Pipeline

To support its growth trajectory, Zhuozhao is investing in both physical capacity and intellectual capital.

Industrialization Project

The "Annual Production of 4,410 Dispensing Equipment and Valves Industrialization Project" is a key capex initiative.
* Status: Previously delayed due to macroeconomic uncertainty and cautious order pacing, the project has been rescheduled.
* Timeline: Expected to be ready for use by Q3 2026 (October 10, 2026).
* Investment: Total planned investment of CNY 88.7 million, with CNY 2.42 million invested as of late 2025.
* Impact: Once operational, this facility will significantly scale the company’s manufacturing capacity, allowing it to handle larger orders from automotive and industrial clients without bottlenecks. It also serves as a showcase for automated, smart manufacturing capabilities.

R&D Pipeline Highlights

The company maintains a robust R&D pipeline, with several projects transitioning from lab to commercialization:

Source: Company 2024 Annual Report, Huayuan Securities Institute.

The development of linear motors is particularly noteworthy. By incubating a subsidiary to produce linear motors, Zhuozhao vertically integrates a critical, high-cost component of its dispensing platforms. This not only reduces reliance on external suppliers (such as Hiwin or THK) but also allows for tighter integration between the motor and the control algorithm, potentially yielding superior dynamic performance.

Risks / Headwinds

While the investment case for Zhuozhao Dispensing is compelling, institutional investors must carefully weigh the following risks:

1. High Customer Concentration Risk

Despite diversification efforts, the company remains heavily reliant on a small number of key customers.
* Data Point: In 2024, the top five customers still accounted for 56.44% of revenue. Historically, this figure has exceeded 80%.
* Implication: Any adverse change in the relationship with major clients (Foxconn, Luxshare, Apple) could have a disproportionate impact on financial performance. Risks include:
* Loss of preferred supplier status due to quality issues or pricing pressure.
* Downstream client consolidation or shift in sourcing strategy.
* Delay in new product launches by key clients (e.g., if Apple delays a new iPhone or Wearable launch).
* Mitigation Monitor: Investors should track the quarterly revenue contribution from non-top-5 customers. A continued decline in the top-5 concentration ratio would be a positive signal.

2. Intensifying Industry Competition

The dispensing equipment market is becoming increasingly crowded.
* Domestic Competition: Companies like Anda Intelligent, Kaige Precision, Shengpu Shares, and Gao Kai Technology are aggressively expanding their product lines and market share. Price wars in the mid-to-low end segment could compress margins.
* Foreign Response: Global leaders like Nordson and Musashi may respond to domestic substitution pressures by lowering prices or offering more flexible financing terms to retain key accounts.
* Technological Race: The barrier to entry in basic dispensing is lowering. Zhuozhao must continuously innovate in high-end features (AI-driven process control, ultra-high speed) to maintain its premium positioning. Failure to keep pace with R&D could lead to commoditization.

3. Macroeconomic and Policy Volatility

Zhuozhao’s downstream markets are cyclical and policy-sensitive.
* Consumer Electronics: Global smartphone and PC demand is mature and sensitive to consumer confidence. A prolonged global recession could dampen replacement cycles.
* NEV & PV: These sectors are heavily influenced by government subsidies and trade policies. For instance, changes in EV subsidy structures in China or tariffs on Chinese solar products in the US/EU could impact the capital expenditure plans of Zhuozhao’s clients (CATL, Solar Manufacturers), leading to order deferrals or cancellations.
* Supply Chain Disruptions: Geopolitical tensions could affect the availability of certain high-end components (e.g., specialized chips for controllers, high-grade materials for valves), although the company’s localization efforts mitigate this risk.

4. Execution Risk in New Markets

Entering the automotive and semiconductor sectors involves long qualification cycles (often 12–24 months) and stringent reliability standards.
* Risk: There is no guarantee that current prototypes and small-batch orders (e.g., with CATL or Samsung) will convert into large-scale, recurring revenue streams.
* Capex Burden: The ongoing investment in R&D and the new industrialization project increases fixed costs. If revenue growth from new sectors lags, operating leverage could turn negative, impacting short-term profitability.

5. Intellectual Property and Talent Retention

As a technology-driven firm, Zhuozhao’s value is tied to its IP and engineering talent.
* IP Risk: While the company holds numerous patents, the risk of IP infringement disputes or inability to enforce patents in a competitive market exists.
* Talent: The shortage of skilled engineers in motion control and fluid dynamics means that retaining key R&D personnel is critical. Poaching by competitors or larger tech firms could disrupt development timelines.

Rating / Sector Outlook

Sector Outlook: Positive

The Specialized Equipment sector, particularly within the realm of precision manufacturing and automation, enjoys a favorable long-term outlook in China.
1. Policy Support: The "Made in China 2025" initiative and subsequent policies emphasize self-sufficiency in high-end equipment, semiconductors, and new energy technologies. This provides a tailwind for domestic equipment makers.
2. Technological Upgrading: Chinese manufacturers are moving up the value chain, requiring more sophisticated automation. This drives demand for high-precision, intelligent equipment like that produced by Zhuozhao.
3. Global Competitiveness: Chinese equipment makers are increasingly competitive globally, offering a balance of performance and cost that is attractive to emerging markets and even developed economies facing inflationary pressures.

Valuation Analysis

We employ a relative valuation approach, comparing Zhuozhao Dispensing to a peer group of listed companies in the automation and testing equipment sector.

Peer Group Selection:
* Kaige Precision (301338.SZ): A direct competitor in SMT and dispensing equipment, with a strong presence in LED and consumer electronics.
* Bojie Shares (002975.SZ): Specializes in automation testing equipment, serving similar consumer electronics and automotive clients.
* Xinyichang (688383.SH): A leader in LED solid crystal equipment, expanding into semiconductor and automation sectors.

Valuation Metrics (as of April 07, 2026):

Source: Wind, Huayuan Securities Institute. Note: Peer forecasts are Wind consensus; Zhuozhao forecasts are Huayuan estimates.

Interpretation:
* Discount to Peers: Zhuozhao trades at a 2026E P/E of 44.6x, which is significantly lower than the peer average of 63.1x.
* Justification for Discount: The discount may reflect:
1. Liquidity Premium: Being listed on the Beijing Stock Exchange (BSE) rather than the Shanghai/Shenzhen main boards or STAR Market often results in a liquidity discount.
2. Size: Zhuozhao is smaller in market cap compared to Kaige and Bojie.
3. Recent History: The 2024 loss may still weigh on investor sentiment, despite the strong 2025 recovery.
* Upside Potential: Given that Zhuozhao’s growth rate (350% profit growth in 2025, ~20% CAGR thereafter) is comparable to or exceeds many peers, and its technological positioning is robust, the current valuation appears attractive. If the company successfully demonstrates sustained growth in non-Apple sectors, a re-rating towards the peer average multiple is plausible.

Investment Rating: Outperform (Initiation)

We assign an Outperform rating to Zhuozhao Dispensing.
* Definition: We expect the stock to outperform the BSE 50 Index by more than 5% over the next 6 months.
* Rationale: The combination of a sharp earnings recovery, successful diversification into high-growth AI and EV sectors, and a valuation discount to peers creates a compelling risk-reward profile. The stock offers exposure to the secular trends of AI hardware adoption and domestic high-end manufacturing substitution.

Investment View

Core Investment Logic

1. The "Apple Plus" Strategy is Working
Zhuozhao is effectively executing a "Barbell Strategy." On one end, it maintains a strong, cash-generating foundation in the Apple supply chain. The stability of this business provides the financial resources to fund R&D and market expansion. On the other end, it is aggressively pursuing high-beta growth opportunities in AI wearables (Meta), EVs (CATL), and Semiconductors (Samsung). The 2025 financial results confirm that this strategy is transitioning from concept to reality, with new businesses contributing meaningfully to the bottom line.

2. Technological Sovereignty and Import Substitution
In the context of global supply chain realignment, Chinese manufacturers are prioritizing supply chain security. Zhuozhao’s ability to deliver equipment that matches Nordson and Musashi in precision and reliability makes it a strategic partner for domestic clients. This is not just a cost play; it is a capability play. The company’s patent portfolio and in-house development of core components (like linear motors and controllers) enhance its defensibility and margin potential.

3. Leveraging AI and Automation Trends
The integration of AI into edge devices (glasses, phones, cars) requires more complex assembly processes. Dispensing is no longer just about applying glue; it’s about precise material deposition for thermal management, electromagnetic shielding, and structural integrity in miniaturized forms. Zhuozhao’s high-precision jetting and screw valve technologies are perfectly aligned with these technical requirements. Furthermore, its expansion into visual inspection allows it to offer a more comprehensive "Smart Factory" solution, increasing its share of wallet per customer.

Financial Forecast and Assumptions

Our financial model is built on the following key assumptions:

Revenue Assumptions:
* Dispensing Valves & Accessories: We project rapid growth in 2025 (+245% YoY) driven by the Meta order and recovery in Apple volumes. Growth normalizes to +12% in 2026 and 2027 as the base expands.
* 2025E Revenue: CNY 262 million
* 2026E Revenue: CNY 293 million
* 2027E Revenue: CNY 329 million
* Dispensing Equipment: We project a +155% surge in 2025 (+12% in 2026, +15% in 2027) as larger integrated systems are deployed for new EV and PV lines.
* 2025E Revenue: CNY 108 million
* 2026E Revenue: CNY 123 million
* 2027E Revenue: CNY 141 million

Profitability Assumptions:
* Gross Margin: Expected to stabilize around 57%. The mix shift towards higher-margin valves and proprietary software/control systems should offset any pricing pressure in standard equipment.
* Operating Expenses: R&D expenses will remain elevated (approx. 10-12% of revenue) to support new product development in semiconductor and EV sectors. Sales and Administrative expenses are expected to grow at a slower rate than revenue, indicating operating leverage.
* Net Profit:
* 2025E: CNY 52 million (Margin: ~13.7%)
* 2026E: CNY 61 million (Margin: ~14.3%)
* 2027E: CNY 75 million (Margin: ~15.5%)

Table 3: Financial Summary & Forecasts (CNY Million)

Source: Company Reports, Huayuan Securities Institute Estimates.

Catalysts for Stock Performance

1. Quarterly Earnings Beats: Consistent delivery on the 2025/2026 profit guidance will rebuild investor confidence after the 2024 miss.
2. Major Contract Announcements: Public disclosure of large-scale orders from CATL, Samsung, or other Tier-1 automotive/OEM players would serve as a strong positive catalyst, validating the diversification narrative.
3. Meta AI Glasses Sales Data: Strong sales figures for Meta’s AI wearables would indirectly benefit Zhuozhao, highlighting its role in a high-growth product category.
4. Capacity Utilization Updates: Positive updates on the ramp-up of the new industrialization project in 2026 could signal readiness for larger scale orders.
5. Policy Support: Any new government subsidies or tax incentives for high-end equipment manufacturing or semiconductor localization would benefit the sector broadly.

Conclusion

Zhuozhao Dispensing represents a high-quality asset in the specialized equipment sector, characterized by strong technical capabilities, a resilient core business, and promising growth vectors in AI and New Energy. The company has navigated a difficult 2024 and emerged with a clearer strategic direction and a diversified customer base.

While risks related to customer concentration and execution in new markets persist, the current valuation does not fully reflect the company’s growth potential and technological moat. The significant discount to A-share peers provides a margin of safety and upside potential. For institutional investors seeking exposure to the convergence of AI hardware, advanced manufacturing, and domestic substitution themes, Zhuozhao Dispensing offers a compelling investment opportunity.

We recommend initiating a position with an Outperform rating, with a medium-to-long-term horizon to allow the diversification strategy to fully mature and the market to re-rate the stock towards its peer group valuation multiples.

Appendix: Detailed Financial Statements

Balance Sheet Forecast (CNY Million)

Cash Flow Statement Forecast (CNY Million)

Income Statement Forecast (CNY Million)

Key Financial Ratios

Analyst Certification and Disclosures

Analyst Certification:
The analysts named in this report, Zhao Hao (SAC: S1350524110004) and Wan Xiao (SAC: S1350524100001), hereby certify that all of the views expressed in this report accurately reflect their personal views about the subject securities and issuers. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

General Disclaimer:
Huayuan Securities Co., Ltd. ("the Company") possesses the qualification for securities investment consulting business approved by the China Securities Regulatory Commission. This report is confidential and intended solely for the use of the Company's clients. The information contained herein is based on sources believed to be reliable, but the Company does not guarantee its accuracy or completeness. This report is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. The opinions and estimates contained in this report reflect the judgment of the analysts as of the date of this report and are subject to change without notice. Past performance is not indicative of future results.

Investment Rating Definitions:
* Outperform: Expected to outperform the relevant benchmark index by >5% over the next 6 months.
* Neutral: Expected to perform in line with the benchmark index (-5% to +5%).
* Underperform: Expected to underperform the benchmark index by >5%.

Benchmark Indices:
* A-Shares (excluding BSE): CSI 300 Index
* Beijing Stock Exchange: BSE 50 Index
* Hong Kong: Hang Seng China Enterprises Index
* US: S&P 500 or NASDAQ Composite

Conflict of Interest Disclosure:
The Company and/or its affiliates may hold positions in the securities mentioned in this report and may engage in trading activities or provide investment banking services to the issuers. Investors should be aware that such interests may create conflicts of interest that could affect the objectivity of this report. This report should not be considered as the sole basis for any investment decision.