Gaoce Shares (688556.SH): Navigating the Photovoltaic Trough; Strategic Pivot to Space PV and Robotics Offers Asymmetric Upside

Date: February 05, 2026
Rating: BUY (Maintained)
Current Price: CNY 14.20
Target Price: Implied upside based on 2026-2027 earnings recovery trajectory
Analysts: Zhou Ershuang, Li Wenyi | Dongwu Securities Research Institute

Executive Summary

Gaoce Shares (688556.SH), a leading provider of hard and brittle material cutting solutions, is currently navigating a challenging macroeconomic environment characterized by severe oversupply in the global photovoltaic (PV) sector. The company’s 2025 annual performance preview indicates a net loss attributable to shareholders of CNY -48 million to -35 million, primarily driven by asset impairment provisions amidst low product pricing. However, a granular analysis of the fourth quarter (Q4) 2025 data reveals a critical inflection point: Q4 attributable net profit is estimated at CNY 33.63–46.63 million, representing a sequential growth of 386%–574% and a year-over-year increase of 113%–118%. This robust quarterly turnaround underscores the resilience of Gaoce’s integrated "Equipment + Consumables + Process" business model and its ability to drive profitability through scale effects and technological cost reductions, even in a depressed market.

While the core PV business faces headwinds, Gaoce is strategically diversifying into high-growth adjacent markets. The company has successfully validated the cutting of 50μm ultra-thin silicon wafers, positioning itself as a pioneer for next-generation space-based photovoltaics and lightweight flexible modules. Furthermore, Gaoce is leveraging its core competencies in grinding technology and tungsten wire materials to enter the humanoid robotics supply chain. Specifically, the development of planetary roller screw grinding machines and tungsten-based tendon ropes for robotic dexterous hands represents a significant second growth curve. With Tesla’s Optimus entering small-batch mass production in 2025, the demand for upstream precision manufacturing equipment is poised for acceleration.

We maintain our BUY rating on Gaoce Shares. Although we have adjusted our 2025 net profit forecast downward to CNY -40 million to reflect the industry-wide pressure, we maintain our forecasts for 2026 and 2027 at CNY 127 million and CNY 241 million, respectively. The current valuation, implying forward P/E multiples of 94x for 2026 and 50x for 2027, reflects the transitional nature of the business. However, given the clear trend of profitability repair in the core business and the optionality provided by the space PV and robotics initiatives, we believe the stock offers compelling long-term value for institutional investors willing to look beyond the cyclical trough.

Key Takeaways

1. Q4 2025 Profitability Inflection: Resilience Amidst Sectoral Headwinds

The most immediate and significant development for Gaoce Shares is the marked improvement in profitability during the fourth quarter of 2025. While the full-year 2025 result is expected to be negative due to one-time impairments and sustained low prices, the Q4 performance demonstrates that the underlying operational engine of the company is strengthening.

Quarterly Performance Breakdown:
* Q4 2025 Attributable Net Profit: Estimated at CNY 33.63 million to CNY 46.63 million.
* Sequential Growth (QoQ): +386% to +574%.
* Year-over-Year Growth (YoY): +113% to +118%.
* Full Year 2025 Estimate: Net loss of CNY -48 million to -35 million; Deducted non-recurring net loss of CNY -140 million to -120 million.

The divergence between the full-year loss and the Q4 profit is primarily attributed to asset impairment provisions taken throughout the year to account for the depressed value of inventory and receivables in the oversupplied PV market. However, the Q4 surge in profits indicates that these impairments are largely behind the company, and operational efficiencies are now driving bottom-line results.

Drivers of Q4 Improvement:
1. Integrated Advantage Realization: Gaoce’s unique business model, which combines cutting equipment, diamond wire consumables, and cutting process services, allows for superior cost control. As shipment volumes of diamond wires and silicon wafer cutting services increased in Q4, the company benefited from significant economies of scale.
2. Process-Driven Cost Reductions: Continuous optimization in cutting processes has reduced material waste and energy consumption per unit, directly enhancing gross margins.
3. Market Share Consolidation: In a downturn, smaller players often exit or reduce capacity. Gaoce’s financial stability and technological lead allow it to capture market share from weaker competitors, further boosting volume without proportional cost increases.

This sequential improvement validates our thesis that Gaoce is well-positioned to survive the PV cycle consolidation and emerge with a stronger competitive posture. The Q4 data serves as a leading indicator for a sustained recovery in 2026.

2. Technological Moat: 50μm Ultra-Thin Wafer Cutting & Space PV Potential

Gaoce Shares continues to demonstrate leadership in hard and brittle material processing, a capability that is becoming increasingly critical as the PV industry pushes the boundaries of physical limits to enhance efficiency and reduce weight.

The 50μm Milestone:
In January 2026, Gaoce officially announced the successful verification of 50μm ultra-thin silicon wafer cutting. This achievement places Gaoce among the first enterprises globally to master this technology at a commercial validation stage. For context, standard mainstream silicon wafers currently range from 130μm to 150μm, with advanced thinning efforts targeting 100μm. Achieving 50μm represents a paradigm shift in material utilization and application potential.

Strategic Implications of Ultra-Thin Cutting:
1. Space-Based Photovoltaics (Space PV):
* Weight Sensitivity: In space applications, launch costs are directly correlated with payload weight. Reducing the thickness of solar cells from 150μm to 50μm reduces the weight of the PV module by approximately 60-70%, assuming other structural components are also optimized. This makes space-based solar power stations economically more viable.
* Efficiency Gains: Thinner wafers can reduce carrier recombination losses if surface passivation is managed correctly, potentially increasing conversion efficiency.
* First-Mover Advantage: By validating 50μm cutting now, Gaoce is positioning itself as a key supplier for the emerging space PV sector, which is expected to see significant investment and deployment in the late 2020s.

1. Terrestrial Lightweight & Flexible Modules:
   • BIPV and Mobile Applications: Ultra-thin wafers enable the creation of flexible, lightweight PV modules suitable for Building-Integrated Photovoltaics (BIPV), electric vehicles (EVs), and portable power solutions. These markets require durability and flexibility that traditional thick wafers cannot provide.
   • Material Savings: Thinner wafers mean more wafers per kilogram of silicon ingot, reducing the raw material cost per watt, which is crucial in a price-sensitive market.

Underlying Technology: Tungsten Wire Cold Drawing:
Gaoce’s ability to achieve 50μm cutting is underpinned by its proprietary tungsten wire cold drawing process, launched in 2024 as an industry first.
* Finer Diameter: Tungsten wire has higher tensile strength than traditional carbon steel wire, allowing it to be drawn to finer diameters without breaking. This reduces the kerf loss (material lost to cutting) and enables thinner wafers.
* Stable Tension Control: The cold drawing process ensures consistent wire quality and tension stability during high-speed cutting, which is critical for preventing wafer breakage at ultra-thin dimensions.
* Versatility: The technology is compatible with both P-type and N-type silicon wafers, ensuring broad applicability across current and next-generation cell technologies (TOPCon, HJT, BC).

Since 2022, Gaoce’s fine-line diamond wires have been mass-supplied to top-tier customers. The integration of these consumables with their proprietary multi-wire cutting machines creates a closed-loop ecosystem where equipment and consumables are co-optimized, creating a high barrier to entry for competitors.

3. Second Growth Curve: Entry into Humanoid Robotics Supply Chain

Beyond PV, Gaoce is actively leveraging its core technological assets to penetrate the humanoid robotics market, a sector projected to experience exponential growth in the coming decade. The company’s strategy focuses on two critical components: Planetary Roller Screw Grinding Machines and Tungsten-Based Tendon Ropes.

A. Planetary Roller Screw Grinding Machines

The Opportunity:
Planetary roller screws (PRS) are the preferred linear actuator technology for humanoid robots due to their high load capacity, compact size, and precision compared to ball screws. However, manufacturing PRS requires extremely precise grinding processes. As Tesla’s Optimus and other humanoid robots move towards small-batch mass production in 2025 and beyond, the demand for high-precision grinding equipment is expected to surge.

Gaoce’s Competitive Edge:
* Technology Transfer: Gaoce has decades of experience in grinding hard and brittle materials. The precision control, thermal management, and vibration damping technologies developed for PV wafer grinding are directly transferable to metal grinding applications.
* R&D Progress: The company has migrated its grinding technology platform to develop specialized grinding machines for planetary roller screws. By entering the equipment supply chain early, Gaoce aims to capture market share before the sector becomes saturated.
* Timing: With the commercialization of humanoid robots accelerating, upstream equipment manufacturers are the first beneficiaries. Gaoce’s early entry positions it to secure contracts with major robot manufacturers and tier-1 suppliers.

B. Tungsten-Based Tendon Ropes for Dexterous Hands

The Opportunity:
Dexterous hands are essential for humanoid robots to perform complex tasks. Tendon-driven mechanisms, which mimic human muscles and tendons, are a dominant design choice for achieving high degrees of freedom and fine motor control. The material used for these tendons must have high tensile strength, low creep, and high fatigue resistance.

Gaoce’s Innovation:
* Material Advantage: Traditional tendon materials often use high-performance polymers like polyethylene (e.g., Dyneema). Gaoce has innovated by applying its tungsten wire mother wire technology to create tungsten-based tendon ropes.
* Performance Benefits:
* Higher Load Capacity: Tungsten’s superior tensile strength allows for thinner, lighter tendons that can handle higher loads, enabling stronger grip forces in robotic hands.
* Anti-Creep Properties: Unlike polymers, which can stretch over time under constant load (creep), tungsten maintains its dimensional stability. This ensures consistent performance and calibration of the robotic hand over its operational life.
* Durability: Enhanced resistance to wear and tear reduces maintenance requirements.
* Status: Product development is complete, and Gaoce is actively sending samples to downstream customers for verification. Successful validation could lead to significant recurring revenue from consumable sales in the robotics sector.

This dual-pronged approach in robotics—selling both the equipment to make the parts and the consumables used in the robot itself—mirrors its successful PV business model, suggesting a high potential for margin expansion and customer stickiness in this new vertical.

4. Financial Analysis and Valuation Adjustment

Revenue and Profit Trends:
The financial data reflects the cyclical downturn in the PV industry but also highlights the path to recovery.

Source: Dongwu Securities Research Institute Estimates

Key Observations:
1. Revenue Contraction Stabilizing: After a sharp 27.65% decline in 2024, revenue is expected to fall another 14.68% in 2025 as prices remain low. However, the decline halts in 2026, with modest growth of 3.65%, followed by a healthier 11.24% growth in 2027. This suggests the bottom of the revenue cycle is near.
2. Profitability Recovery: The swing from a CNY 1.46 billion profit in 2023 to losses in 2024-2025 is stark. However, the return to profitability in 2026 (CNY 127 million) and strong growth in 2027 (CNY 241 million) indicates a robust recovery. The 416% YoY profit growth in 2026 is driven by operating leverage and margin expansion.
3. Margin Expansion: Gross margins are forecast to improve from 18.47% in 2025 to 22.01% in 2027. This is driven by:
* Exit of low-margin legacy contracts.
* Higher mix of high-value consumables and services.
* Cost efficiencies from the integrated model.
* Potential higher margins from new robotics and space PV products.

Valuation Context:
* Current P/E: Due to negative earnings in 2024 and 2025, trailing and current P/E ratios are negative or meaningless (-270x and -297x respectively).
* Forward P/E: The relevant metrics are the forward P/E ratios for 2026 and 2027, which stand at 94.12x and 49.80x respectively.
* Interpretation: While a 94x P/E for 2026 may appear elevated compared to traditional manufacturing peers, it must be viewed in the context of:
1. Turnaround Story: The multiple reflects the high growth rate of earnings recovery (from loss to profit).
2. Tech Premium: Gaoce is not just a manufacturer but a technology enabler for high-growth sectors (Space PV, Robotics).
3. Base Effect: The 2026 earnings base is still low. As earnings normalize in 2027, the P/E compresses to a more reasonable 50x, which is attractive for a company with nearly 90% earnings growth.

Balance Sheet Health:
* Assets: Total assets are projected to grow from CNY 7.75 billion in 2024 to CNY 8.66 billion in 2027.
* Liabilities: The debt structure remains manageable. The asset-liability ratio is forecast to decrease slightly from 52.53% in 2024 to 53.71% in 2027, indicating stable leverage.
* Cash Flow: Operating cash flow is expected to turn positive in 2025 (CNY 591 million) after a negative outflow in 2024, signaling improved working capital management and collection efficiency.

Risks / Headwinds

Investors should carefully consider the following risks, which could impact the company’s financial performance and stock price trajectory:

1. Photovoltaic Industry Demand and Pricing Risk

• Oversupply Persistence: The global PV industry is currently grappling with significant overcapacity. If the supply-demand imbalance persists longer than anticipated, product prices (silicon wafers, diamond wires) may remain depressed, delaying the recovery of gross margins.
• Demand Volatility: Global PV installation growth is subject to policy changes, trade barriers (e.g., tariffs in the US and EU), and grid connectivity issues. A slowdown in downstream demand would directly impact Gaoce’s equipment and consumable sales.
• Impairment Risks: Further declines in asset values could necessitate additional impairment charges, impacting net profit in future quarters.

2. New Technology R&D and Commercialization Risk

• Space PV Uncertainty: While 50μm cutting is technically verified, the commercial viability of space-based solar power depends on broader aerospace industry developments, launch cost reductions, and regulatory approvals. Delays in the space sector could postpone revenue contributions from this segment.
• Robotics Adoption Rate: The humanoid robotics market is in its infancy. Mass adoption depends on solving complex AI, battery, and cost challenges. If the rollout of robots like Tesla’s Optimus is slower than expected, the demand for Gaoce’s grinding machines and tendon ropes will be delayed.
• Technical Failure: There is a risk that the tungsten tendon ropes or grinding machines may not meet the stringent performance or reliability standards required by major robotics clients during the verification phase.

3. Competition and Market Share Risk

• Intensified Competition: The PV equipment and consumables market is highly competitive. Competitors may engage in aggressive price wars to maintain market share, eroding margins.
• New Entrants in Robotics: As the robotics supply chain becomes more lucrative, new competitors may enter the grinding equipment and tendon material markets, potentially squeezing Gaoce’s margins and market share.
• Technological Disruption: Rapid advancements in alternative cutting technologies (e.g., laser cutting) or alternative actuator technologies (e.g., hydraulic or pneumatic systems replacing screws) could render Gaoce’s current solutions less competitive.

4. Operational and Financial Risks

• Raw Material Price Fluctuations: The cost of tungsten and other raw materials can be volatile. Inability to pass these costs onto customers could compress margins.
• Exchange Rate Risk: As Gaoce expands internationally, fluctuations in currency exchange rates could impact the value of overseas revenues and expenses.
• Execution Risk: Successfully scaling up new businesses (robotics, space PV) requires significant management attention and capital allocation. Execution missteps could hinder growth.

Rating / Sector Outlook

Sector Outlook: Photovoltaics & Advanced Manufacturing

Photovoltaics:
The PV sector is currently in a "clearing" phase. We expect continued consolidation in 2025, with weaker players exiting the market. However, the long-term fundamentals remain strong due to the global energy transition. By 2026-2027, we anticipate a rebalancing of supply and demand, leading to healthier pricing and margins. Companies with technological moats and integrated business models, like Gaoce, are best positioned to survive the downturn and thrive in the recovery.

Humanoid Robotics:
This sector is transitioning from concept to early commercialization. 2025-2026 is a critical window for supply chain validation. We view this as a high-growth, high-potential sector with a long runway. Early suppliers who establish technical standards and customer relationships will enjoy significant competitive advantages.

Space Economy:
Space-based solar power is a nascent but strategically important field. Government and private sector investments are increasing. While revenue contribution in the short term may be minimal, the strategic positioning and IP developed now will be valuable assets in the 2030s.

Investment Rating: BUY (Maintained)

We maintain our BUY rating on Gaoce Shares (688556.SH).

Rationale:
1. Bottom-Line Turnaround Confirmed: The Q4 2025 profit surge provides concrete evidence that the company’s operational adjustments are working and that the worst of the earnings decline is over.
2. Valuation Reflects Transition: The current market capitalization (approx. CNY 11.8 billion) and forward P/E multiples adequately price in the near-term challenges while offering upside from the 2026-2027 recovery.
3. Optionality Value: The investments in space PV and robotics provide significant call options. If either of these sectors accelerates, Gaoce’s valuation could re-rate significantly higher as it transitions from a cyclical PV player to a diversified advanced manufacturing tech leader.
4. Technological Leadership: The 50μm cutting capability and tungsten wire expertise are defensible moats that differentiate Gaoce from pure-play commodity manufacturers.

Target Price Considerations:
While a specific target price is not explicitly recalculated in this note, the implied valuation based on 2027 earnings of CNY 241 million and a reasonable growth-adjusted P/E multiple suggests substantial upside from the current level of CNY 14.20. Investors should monitor the quarterly progression of gross margins and the announcement of any major contracts in the robotics sector as key catalysts for price appreciation.

Investment View

Strategic Thesis: From Cyclical Survivor to Structural Grower

Gaoce Shares represents a compelling investment opportunity for institutional investors seeking exposure to the next generation of advanced manufacturing. The investment thesis rests on three pillars: Cyclical Recovery, Technological Moat, and Structural Diversification.

1. Navigating the Cycle: The "Integrated Model" Advantage

In the highly commoditized PV industry, Gaoce’s integrated model of "Equipment + Consumables + Process" is its primary defense against volatility. Unlike pure equipment makers who suffer when capex slows, or pure consumable makers who suffer from price wars, Gaoce captures value at multiple stages.
* During Downturns: The company can leverage its process expertise to help customers reduce costs, thereby maintaining demand for its consumables and services. The Q4 2025 results prove this resilience.
* During Upturns: The company benefits from both equipment replacement cycles and increased consumable volume.
* Investment Implication: Investors should view the 2025 loss as a cyclical anomaly rather than a structural failure. The focus should be on the trajectory of margin recovery, which is clearly upward.

2. The Moat: Precision at the Limit

Gaoce’s ability to cut 50μm wafers is not just a technical feat; it is a commercial barrier.
* High Barrier to Entry: Achieving stable, high-yield cutting at this thickness requires deep know-how in wire material science, machine dynamics, and process control. Competitors cannot easily replicate this without years of R&D.
* Customer Stickiness: Once a customer validates Gaoce’s 50μm process for high-value applications (like space PV), switching costs are high. This creates a locked-in revenue stream for high-margin niche products.
* Investment Implication: This technological lead justifies a premium valuation relative to peers. It also provides a hedge against commoditization in the standard PV market.

3. The Optionality: Robotics and Space as Multipliers

The pivot to robotics and space PV transforms Gaoce from a single-industry player to a platform technology company.
* Robotics: The synergy between PV grinding and robot screw grinding is a classic example of "technology adjacency." Gaoce is not starting from scratch; it is repurposing proven capabilities for a higher-growth market. The tungsten tendon rope is a disruptive innovation that could become a standard component in humanoid hands.
* Space PV: As the world looks to space for unlimited clean energy, Gaoce is positioning itself as the "Intel Inside" of space solar panels.
* Investment Implication: These new ventures provide asymmetric upside. Even if they contribute modestly to earnings in 2026-2027, they significantly enhance the long-term total addressable market (TAM) and justify a higher terminal multiple.

Actionable Insights for Investors

1. Monitor Q1 2026 Results: Confirm whether the Q4 2025 profitability trend continues. Look for sequential improvement in gross margins and a reduction in impairment charges.
2. Track Robotics Milestones: Pay close attention to announcements regarding the verification and adoption of Gaoce’s grinding machines and tendon ropes by major robotics firms. Any signed contract or partnership would be a major positive catalyst.
3. Assess Space PV Developments: Watch for industry news on space-based solar projects. Gaoce’s involvement in any pilot projects or government-funded research initiatives would validate the commercial potential of its 50μm technology.
4. Long-Term Horizon: This is not a short-term trade. The full realization of the robotics and space PV strategies will take several years. Investors should adopt a long-term perspective, accumulating shares during periods of PV sector pessimism.

Conclusion

Gaoce Shares is at a pivotal juncture. The company has successfully weathered the initial shock of the PV downturn, demonstrating operational resilience and a clear path to profitability restoration. Simultaneously, it is laying the groundwork for a transformative expansion into robotics and space applications.

For institutional investors, Gaoce offers a rare combination of near-term cyclical recovery and long-term structural growth. The risks are real, particularly regarding the pace of PV recovery and robotics adoption, but the potential rewards are commensurate. The company’s technological depth, integrated business model, and strategic foresight make it a standout candidate in the advanced manufacturing sector.

We reaffirm our BUY rating, encouraging investors to look past the transient losses of 2025 and focus on the robust earnings recovery and new growth engines set to drive value in 2026 and beyond.

Appendix: Detailed Financial Forecasts & Data

Income Statement Forecast (CNY Million)

Balance Sheet Highlights (CNY Million)

Cash Flow Statement Highlights (CNY Million)

Key Valuation Metrics

Note: All financial data and forecasts are sourced from Dongwu Securities Research Institute. Currency is CNY. Past performance is not indicative of future results.

Disclaimer

This report is prepared by Dongwu Securities Research Institute for institutional clients only. It 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. The opinions expressed are subject to change without notice. Investors should conduct their own independent research and consult with financial advisors before making investment decisions. Dongwu Securities and its affiliates may hold positions in the securities mentioned and may engage in trading activities. Unauthorized reproduction or distribution of this report is prohibited.