Gaoce Shares (688556.SH): Inflection Point Confirmed in 2025; Overseas PV & Robotics Open New Growth Frontiers

Date: April 1, 2026
Analyst: Zhou Ershuang, Li Wenyi (Dongwu Securities)
Rating: BUY (Maintained)
Current Price: CNY 13.08
Target Valuation Context: P/E 74x (2026E), 51x (2027E), 43x (2028E)

Executive Summary

Gaoce Shares (688556.SH), a leading provider of photovoltaic (PV) cutting equipment and consumables, has successfully navigated the severe downturn in the global solar industry throughout 2025. Our analysis of the company’s 2025 annual report indicates that while full-year financial performance remained under pressure due to industry-wide headwinds, a definitive operational inflection point was achieved in the fourth quarter (Q4). The company reported a quarterly return to profitability in Q4 2025, driven by improving gross margins, cost optimization, and a structural shift in its revenue mix toward higher-resilience service-based models.

The core investment thesis for Gaoce Shares is pivoting from a pure-play domestic PV equipment vendor to a diversified technology platform with two distinct growth engines: Overseas Photovoltaic Expansion and Humanoid Robotics Components.

1. PV Business Stabilization & Recovery: The domestic PV manufacturing sector is showing early signs of stabilizing as policy-driven "anti-involution" measures curb无序 (disorderly) competition. Gaoce’s slicing service business has become the primary revenue pillar, benefiting from economies of scale and technological moats in thin-wafer processing. Furthermore, the company is strategically positioned to capture demand from emerging overseas capacity, particularly linked to major global initiatives such as Tesla’s projected 100GW ground-based and space-based solar expansions over the next three years.
2. Robotics Breakthrough: Leveraging its core competencies in grinding technology and tungsten wire materials, Gaoce has successfully entered the humanoid robotics supply chain. The company has developed prototype external/internal thread grinders for planetary roller screws—a critical component in linear actuators—and has secured small-batch orders for tungsten-based tendon cables for robotic dexterous hands. This diversification opens a high-margin, long-term growth curve independent of the cyclical PV market.

We maintain our BUY rating. We have adjusted our net profit attributable to shareholders forecasts for 2026-2027 to CNY 146 million and CNY 211 million, respectively, reflecting a more conservative recognition timeline for certain orders but acknowledging the strong margin recovery. We introduce a 2028 forecast of CNY 252 million. At the current market capitalization of approximately CNY 10.87 billion, the stock trades at forward P/E multiples of 74x, 51x, and 43x for 2026, 2027, and 2028, respectively. Given the confirmed earnings inflection and the optionality provided by the robotics segment, we believe the current valuation offers an attractive entry point for institutional investors seeking exposure to the next generation of advanced manufacturing technologies.

Key Takeaways

1. Financial Performance: Q4 2025 Marks a Clear Turning Point

The fiscal year 2025 was characterized by significant headwinds stemming from the broader downturn in the photovoltaic industry chain. However, a detailed decomposition of the financials reveals a robust recovery trajectory in the second half of the year, culminating in a strong Q4 performance.

1.1 Full-Year 2025 Results: Pressure Amidst Transition

• Revenue: Total operating revenue reached CNY 3.65 billion, representing a year-over-year (YoY) decline of 18.43%. This contraction was primarily driven by the sharp decrease in capital expenditure by PV manufacturers, which directly impacted equipment sales.
• Profitability: The company reported a net loss attributable to shareholders of CNY 40.58 million. While this represents a continued loss, it is a notable improvement compared to the CNY 44.23 million loss in 2024, indicating a narrowing of losses despite the top-line contraction. The YoY improvement in net profit terms was 8.24% (reduction in loss magnitude).
• Margins: The overall gross margin for 2025 stood at 14.35%, a decrease of 4.63 percentage points (pct) YoY. The net profit margin was -1.11%, slightly down by 0.12 pct YoY. These compressed margins reflect the intense price competition in the PV sector during the first three quarters of the year.

1.2 Q4 2025: The Inflection Quarter

The fourth quarter of 2025 demonstrated a decisive reversal in trends, validating our thesis that the worst of the cycle is behind the company.

• Revenue Rebound: Q4 single-quarter revenue amounted to CNY 1.219 billion, achieving a YoY growth of 16.92% and a Quarter-over-Quarter (QoQ) growth of 11.63%. This return to double-digit growth signals renewed demand and improved order execution.
• Profitability Turnaround: Crucially, Gaoce returned to profitability in Q4, reporting a net profit attributable to shareholders of CNY 41 million. This compares to a loss in the same period last year, marking a YoY turnaround to profit. On a QoQ basis, net profit surged by 493.46%, highlighting the operational leverage kicking in as utilization rates improved.
• Margin Expansion: Q4 gross margin expanded significantly to 18.27%, up 12.32 pct YoY and 4.54 pct QoQ. The net profit margin for the quarter reached 3.37%, an impressive 27.3 pct YoY improvement and a 2.66 pct QoQ increase. This margin expansion is attributed to a favorable product mix shift towards higher-margin slicing services and effective cost control measures.

Source: Company Reports, Dongwu Securities Institute

2. Business Segment Analysis: Structural Shift Towards Resilience

The composition of Gaoce’s revenue has undergone a fundamental transformation in 2025. The traditional cyclicality of equipment sales has been mitigated by the rapid growth of the slicing service business, which now acts as the company’s financial anchor.

2.1 Slicing Service: The New Revenue Pillar

• Performance: Slicing service revenue reached CNY 1.862 billion in 2025, surging 43.85% YoY.
• Contribution: This segment now accounts for 51.02% of total revenue, up significantly from previous years. This shift underscores the success of Gaoce’s strategy to transition from a pure equipment seller to a service-oriented provider.
• Strategic Advantage: As the PV industry enters a buyer’s market, downstream wafer manufacturers are increasingly outsourcing slicing to specialized providers who can offer lower costs through technological efficiency and scale. Gaoce’s deep R&D in ultra-thin wafer slicing and its large-scale capacity allow it to establish a low-cost barrier. In an industry clearing phase, leaders with cost advantages gain market share. The resilience of this segment provides stable cash flows even when capex cycles are dormant.

2.2 Diamond Wire: Steady Growth in Consumables

• Performance: Revenue from diamond wire (consumables) totaled CNY 798 million, growing 15.12% YoY.
• Contribution: This segment represents 21.86% of total revenue.
• Logic: Diamond wire is a recurring consumable tied directly to slicing volume rather than new capacity installation. As existing capacity utilization stabilizes and slicing volumes remain robust due to the global energy transition, this segment provides a predictable revenue stream. The growth here outpaced the overall industry decline, indicating Gaoce’s ability to capture share from competitors through superior product quality (e.g., thinner wires, higher tensile strength).

2.3 PV Cutting Equipment: Cyclical Trough

• Performance: Revenue from PV cutting equipment fell sharply to CNY 242 million, a decline of 88.04% YoY.
• Contribution: The share of equipment revenue dropped to just 6.63% of total revenue.
• Context: This drastic decline reflects the near-freeze in new PV manufacturing capex in China during 2025 as producers dealt with oversupply and inventory digestion. However, this segment is highly elastic. As the industry clears excess capacity and new technologies (such as BC or HJT iterations) require new equipment lines, this segment is poised for a rebound. The low base effect means that even modest recovery in capex will result in high percentage growth figures in 2026-2027.

2.4 Innovation & Other Businesses

• Performance: Revenue from innovation and other businesses reached CNY 290 million, up 18.22% YoY.
• Contribution: Accounts for 7.94% of total revenue.
• Significance: This category includes early-stage ventures, including the nascent robotics components business. The double-digit growth here, despite the heavy focus on core PV operations, highlights the successful initial commercialization of new technologies outside the traditional solar domain.

3. Operational Efficiency & Cost Control

Despite the revenue contraction, Gaoce demonstrated disciplined management of operating expenses, which was critical in narrowing losses and enabling the Q4 profitability turnaround.

• Period Expense Ratio: The total period expense ratio decreased to 16.59% in 2025, a reduction of 1.30 pct YoY.
• Breakdown of Expenses:
  • Selling Expenses: Ratio of 2.02% (-0.14 pct YoY). Indicates efficient sales channels and reduced need for aggressive marketing in a supply-constrained (for high-end tech) or consolidated market.
  • Administrative Expenses: Ratio of 7.53% (-1.75 pct YoY). Reflects streamlined organizational structures and better overhead management.
  • R&D Expenses: Ratio of 5.17% (-0.38 pct YoY). Note: While the ratio decreased, absolute R&D spending remains substantial (CNY 189 million in 2025). The slight decrease in ratio is due to the denominator (revenue) shrinking less than the optimization in other areas, but critically, the company continues to invest heavily in next-gen grinding tech and robotics R&D, ensuring long-term competitiveness.
  • Financial Expenses: Ratio of 1.87% (+0.97 pct YoY). The increase is likely due to interest costs associated with working capital financing during the cash-flow tight period, though absolute levels remain manageable.

4. Balance Sheet & Cash Flow Dynamics

The balance sheet changes in 2025 reflect the transitional nature of the business model and the industry environment.

• Contract Liabilities: Ended 2025 at CNY 113 million, a significant YoY decline of 50.98%. Contract liabilities represent advance payments from customers for equipment. The drop confirms the slowdown in new equipment orders during the year. However, looking forward, any stabilization in capex should see this metric stabilize or grow, serving as a leading indicator for future equipment revenue.
• Inventory: Increased to CNY 1.031 billion (Note: Table shows 1,031 Mn in assets, text says 10.31 Yi which is 1,031 Mn), a YoY increase of 56.61%.
  • Analysis: A rising inventory level in a downturn can be a risk signal. However, for Gaoce, this must be contextualized. Part of this inventory may be related to the slicing service business (WIP - Work in Progress) and raw materials for diamond wire production. Given the Q4 revenue surge, much of this inventory is likely being drawn down in early 2026. Investors should monitor inventory turnover ratios in Q1 2026 to ensure this does not become a drag on cash flow.
• Cash Flow: Net operating cash flow was negative CNY 328 million, a YoY decline of 73.99%.
  • Driver: The report attributes this primarily to the impact of the PV industry chain, noting that "procurement payments decreased." This phrasing suggests that while cash outflow for purchases might have been managed, the inflow from receivables was slower, or there were timing mismatches. The negative OCF is a concern but is typical for companies in the trough of a cycle with high inventory buildup. The forecast for 2026 shows a strong recovery to positive CNY 680 million, implying a normalization of working capital cycles as revenue grows and inventory is sold.

5. Strategic Growth Drivers: Beyond Domestic PV

The most compelling aspect of the Gaoce investment case lies in its dual-engine growth strategy that decouples its future from the saturated domestic PV equipment market.

5.1 Overseas PV Demand: The Tesla Catalyst

While domestic PV manufacturing faces consolidation, global demand for solar energy continues to accelerate, particularly in markets with localized manufacturing incentives or specific large-scale projects.

• Tesla’s Ambitious Plan: The report highlights a specific catalyst: Tesla’s plan to build 100GW of photovoltaic capacity over the next three years, split between ground-based installations and space-based solar applications.
• Gaoce’s Position: As a global leader in slicing equipment and technology, Gaoce is well-positioned to supply the necessary cutting solutions for these massive projects. Space-based solar, in particular, requires ultra-lightweight and high-efficiency wafers, where Gaoce’s thin-wafer slicing expertise is a competitive advantage.
• Implication: This represents a potential multi-billion RMB opportunity. Even capturing a fraction of this supply chain would materially impact Gaoce’s medium-term revenue profile. The "Overseas" narrative shifts the valuation framework from a stagnant domestic utility-tech player to a global growth supplier.

5.2 Humanoid Robotics: A Blue Ocean Opportunity

Gaoce is leveraging its core technological pillars—Grinding Technology and Tungsten Material Science—to enter the humanoid robotics supply chain. This is not a speculative venture but one with tangible product milestones achieved in 2025.

A. From Grinding Tech to Planetary Roller Screws (PRS)
* The Component: Planetary Roller Screws are the core linear actuator components in humanoid robots (e.g., Tesla Optimus), providing high load capacity and precision in a compact form factor.
* The Bottleneck: High-precision grinders required to manufacture PRS threads are currently a bottleneck in the supply chain, dominated by a few European and Japanese firms.
* Gaoce’s Solution: Utilizing its decades of experience in precision grinding for PV equipment, Gaoce has rapidly developed prototypes for external and internal thread grinders.
* Status: With Tesla Optimus entering small-batch mass production in 2025, the demand for upstream equipment is releasing. Gaoce’s ability to provide domestic alternatives for these critical machines positions it to capture early market share in the "picks and shovels" phase of the robotics boom.

B. From Diamond Wire to Dexterous Hand Tendon Cables
* The Component: Dexterous hands require tendon cables that are strong, lightweight, and resistant to creep (deformation under stress) to enable fine motor skills.
* Material Advantage: Traditional polyethylene tendons can suffer from creep. Gaoce has applied its expertise in tungsten wire (used in diamond wire cores) to develop tungsten-based tendon cables.
* Performance: Tungsten offers superior tensile strength and anti-creep properties compared to polymers, resulting in more stable and precise hand operations.
* Status: The company has completed product development and entered trial phases with head-tier customers (implied to be major robotics developers). Crucially, it has already achieved small-batch order breakthroughs. This validates the technical feasibility and commercial acceptance of the product.

Investment Implication: The robotics segment transforms Gaoce into a cross-industry platform company. The valuation multiple for robotics suppliers is typically significantly higher than for PV equipment suppliers. As revenue from robotics scales from "small batch" to mass production in 2026-2028, it will drive multiple expansion.

Risks / Headwinds

While the outlook is positive, institutional investors must consider the following risks inherent in Gaoce’s business model and macro environment:

1. Photovoltaic Industry Demand Uncertainty

• Risk: The recovery of the PV industry is contingent on the clearance of excess capacity and the stabilization of silicon prices. If the "anti-involution" policies are ineffective or if global trade barriers (tariffs) restrict Chinese PV exports, the anticipated recovery in slicing volumes and equipment capex could be delayed.
• Impact: This would directly affect the core revenue base (Slicing Services and Diamond Wire) and push the breakeven point for new investments further out.

2. New Technology R&D Risks

• Risk: The robotics business relies on the successful commercialization of new products (thread grinders and tungsten tendons). Technical hurdles in mass production, yield rates, or performance consistency could arise.
• Impact: Failure to meet the stringent quality standards of tier-1 robotics clients (like Tesla) could result in lost contracts and sunk R&D costs. The timeline for revenue contribution from robotics is uncertain.

3. Industrialization of New Businesses

• Risk: Moving from "small-batch orders" to mass production in robotics is a significant leap. Scaling up manufacturing capabilities, managing supply chains for new materials, and competing with established international players in the precision machine tool sector pose execution risks.
• Impact: Slower-than-expected industrialization could mean that the robotics segment contributes negligibly to earnings in the 2026-2027 window, disappointing growth expectations priced into the stock.

4. Financial & Liquidity Pressure

• Risk: The negative operating cash flow in 2025 (-CNY 328 million) and high inventory levels (CNY 1.03 billion) indicate working capital strain. If the Q4 recovery does not sustain into 2026, the company may face liquidity constraints, requiring additional financing which could dilute shareholders or increase interest burdens.
• Impact: Monitor the 2026 Q1 cash flow statement closely. A failure to turn OCF positive would be a red flag.

5. Geopolitical & Trade Risks

• Risk: As Gaoce expands overseas (e.g., supplying Tesla’s global projects), it becomes exposed to geopolitical tensions, trade restrictions, and supply chain decoupling efforts by Western nations.
• Impact: Tariffs or export controls on high-end manufacturing equipment could limit access to key overseas markets.

Rating / Sector Outlook

Sector Outlook: Photovoltaic Equipment & Services

The PV equipment sector is transitioning from a phase of aggressive expansion to consolidation and technological iteration.
* Short-term (2025-2026): The sector is bottoming out. Policy interventions in China to prevent predatory pricing are beginning to stabilize margins. The focus is shifting from "capacity quantity" to "capacity quality" (efficiency, thinness, cost).
* Medium-term (2027+): Growth will be driven by overseas manufacturing hubs (US, Europe, Middle East, India) and next-generation technologies (BC, HJT, Perovskite tandem). Companies with strong service models (like Gaoce’s slicing) and international client bases will outperform pure equipment sellers.

Sector Outlook: Humanoid Robotics Supply Chain

The humanoid robotics sector is in the early commercialization phase.
* 2025-2026: Characterized by pilot runs, small-batch production, and supply chain validation. Equipment makers (grinders, CNC) and component suppliers (screws, sensors, actuators) are the primary beneficiaries.
* Valuation: The sector commands high valuation multiples due to the massive total addressable market (TAM) and the scarcity of qualified suppliers. Gaoce’s entry into this space provides a significant valuation re-rating opportunity.

Investment Rating: BUY (Maintained)

We maintain our BUY rating on Gaoce Shares. The company has demonstrated resilience in a harsh environment, achieved a clear earnings inflection in Q4 2025, and possesses credible, high-growth optionality in robotics. The risk-reward profile is favorable given the current valuation relative to the projected earnings recovery and new business potential.

Investment View

1. Valuation Analysis & Earnings Forecasts

We have updated our financial model to reflect the 2025 actuals and the evolving visibility of the 2026-2028 recovery.

Key Adjustments:
* 2026 Net Profit: Adjusted to CNY 146.3 million (from previous CNY 130 million). This upward revision reflects the stronger-than-expected Q4 2025 margin performance and the momentum in slicing services.
* 2027 Net Profit: Adjusted to CNY 211.08 million (from previous CNY 240 million). This slight downward revision accounts for a more conservative assumption on the speed of overseas equipment order recognition and the gradual ramp-up of robotics revenue.
* 2028 Net Profit: Introduced at CNY 251.53 million, assuming continued growth in robotics commercialization and a full-cycle recovery in PV capex.

Valuation Metrics:
At the current share price of CNY 13.08 and a total share capital of 830.77 million shares, the market capitalization is approximately CNY 10.87 billion.

Source: Dongwu Securities Institute Estimates

Interpretation:
* The high P/E of 74x for 2026E is typical for a company emerging from a loss-making trough with high expected growth rates (>400%).
* The rapid compression of P/E to 51x in 2027E and 43x in 2028E indicates that earnings growth is expected to outpace price appreciation, making the stock increasingly attractive on a fundamental basis.
* Compared to pure PV equipment peers trading at 15-25x P/E, Gaoce commands a premium due to its service-based recurring revenue model and the robotics growth optionality. We believe this premium is justified given the higher quality of earnings (cash flow potential from services) and the explosive potential of the robotics segment.

2. Core Investment Logic

A. Certainty of Recovery in Core Business
The Q4 2025 data provides empirical evidence that the worst is over. The combination of rising gross margins (18.27%) and positive net profit confirms that Gaoce can operate profitably even in a subdued capex environment, thanks to its slicing service dominance. As the PV industry stabilizes, the operating leverage will drive disproportionate profit growth. The "Anti-Involution" policy framework in China supports price stability, protecting margins for leading players like Gaoce.

B. Asymmetric Upside from Robotics
The robotics business represents a classic "call option" with increasing probability of success.
* Technological Synergy: Unlike many companies pivoting to robotics without relevant expertise, Gaoce’s move is grounded in existing core competencies (grinding and tungsten). This reduces execution risk.
* Early Mover Advantage: Securing small-batch orders and completing prototype development in 2025 places Gaoce ahead of many domestic competitors. As the Tesla Optimus and other humanoid robots scale in 2026-2027, Gaoce is positioned to be a key supplier of critical bottlenecks (screw grinders and high-performance tendons).
* Valuation Re-rating: Success in robotics will allow analysts to value Gaoce partially as a robotics stock, which typically trades at significantly higher multiples than industrial machinery stocks.

C. Overseas Expansion De-risks Domestic Cyclicality
The potential involvement in Tesla’s 100GW solar project illustrates Gaoce’s ability to pivot to global demand. This diversifies its customer base and reduces reliance on the volatile Chinese domestic market. Overseas projects often carry better payment terms and higher margins, further enhancing financial health.

3. Strategic Recommendations for Institutional Investors

• Accumulate on Weakness: Given the confirmed inflection point, any short-term volatility driven by broader market sentiment or temporary PV news flow should be viewed as a buying opportunity. The long-term trend is upward.

• Monitor Key Catalysts:

  1. Q1 2026 Earnings: Confirm the sustainability of Q4 2025 margins and the turnaround in operating cash flow.
  2. Robotics Order Announcements: Look for formal announcements of larger-scale contracts with major robotics OEMs (e.g., Tesla, Figure, or domestic leaders like Ubtech).
  3. Overseas Project Wins: News regarding participation in major non-Chinese PV projects (specifically Tesla-related or US/EU localized manufacturing).
  4. Inventory Turnover: Watch for a decline in inventory levels in subsequent quarters, which would confirm the digestion of the 2025 buildup and improved cash conversion.

• Time Horizon: This is a medium-to-long-term hold (12-24 months). The full realization of the robotics revenue stream and the complete recovery of the PV capex cycle will take time. However, the stock price is likely to front-run these earnings improvements as visibility increases.

4. Conclusion

Gaoce Shares stands at a pivotal juncture. It has successfully weathered the storm of the PV industry’s deepest downturn, emerging with a more resilient business model anchored by slicing services. The Q4 2025 performance is not just a seasonal blip but a structural inflection point supported by margin expansion and cost discipline.

Looking forward, the company is no longer just a proxy for Chinese PV capex. It is evolving into a global advanced manufacturing platform with significant exposure to the nascent but high-potential humanoid robotics industry. The convergence of a recovering core business and a breakthrough new growth engine creates a compelling risk-reward profile.

We reiterate our BUY rating. We advise institutional investors to position for the dual growth story of PV Recovery + Robotics Explosion, targeting a 12-18 month horizon where earnings visibility improves and valuation multiples expand to reflect the new growth paradigm.

Appendix: Detailed Financial Forecasts & Assumptions

Revenue Build-up Assumptions

Margin & Expense Assumptions

• Gross Margin: Expected to stabilize around 16.9% in 2026-2028. This reflects a blend of moderate PV service margins and higher-margin robotics products. The sharp Q4 2025 margin of 18.27% may normalize slightly as product mix fluctuates, but the structural shift to services prevents a return to the lows of 2023-2024.
• R&D Expenses: Expected to grow in absolute terms (CNY 207M in 2026E to CNY 303M in 2028E) to support robotics product iteration and next-gen PV tech. However, as a % of revenue, it will remain manageable (~5-6%) due to revenue growth.
• Tax Rate: Effective tax rate assumed to remain stable based on historical averages and high-tech enterprise status benefits.

Cash Flow & Working Capital

• Operating Cash Flow: Projected to turn strongly positive in 2026 (CNY 680 million) as inventory is drawn down and receivables from the slicing service business (which has better cash characteristics than large equipment projects) dominate.
• Capex: Capital expenditures are expected to remain moderate (CNY 335 million in 2026E) as the heavy expansion phase of PV capacity is over. Future capex will be focused on robotics production lines and specialized grinding machine R&D facilities.

Disclaimer & Regulatory Information

Analyst Certification:
The analysts named in this report, Zhou Ershuang (S0600515110002) and Li Wenyi (S0600524080005), certify that all of the views expressed in this research report accurately reflect their personal views about the subject securities or issuers. They also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Important Disclosures:
* Investment Rating Definition:
* BUY: Expected return > 15% relative to benchmark (CSI 300) over the next 6-12 months.
* OUTPERFORM: Expected return between 5% and 15%.
* NEUTRAL: Expected return between -5% and 5%.
* UNDERPERFORM: Expected return between -15% and -5%.
* SELL: Expected return < -15%.
* Benchmark: A-share market benchmark is the CSI 300 Index.
* Conflict of Interest: Dongwu Securities and its affiliates may hold positions in the securities mentioned in this report and may engage in trading activities. They may also provide investment banking or other services to the companies covered.

Risk Warning:
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 information contained herein is based on sources believed to be reliable, but Dongwu Securities does not guarantee its accuracy or completeness. Investors should conduct their own independent research and consult with financial advisors before making investment decisions. Past performance is not indicative of future results.

Copyright:
© 2026 Dongwu Securities Co., Ltd. All rights reserved. No part of this report may be reproduced or distributed in any form without prior written permission from Dongwu Securities.

End of Report