We forecast Hengli to deliver 30% YoY revenue growth in 2Q26, driven by strong hydraulic parts for excavators, as well as fast-growing precision revenue. On the profit side, we expect net profit to largely stay flat YoY at ~RMB800mn in 2Q26, due to (1) high base arising from high gross margin (44%) in 2Q25, (2) FX loss of ~RMB200mn, based on our estimates, as a result of the appreciation of RMB in 2Q26. On the other hand, we believe the latest ban on foreign humanoid robots (source) sales in the US will have no impact on Hengli, given that the majority of Hengli’s capacity of robotic ball screws is allocated to a major US robot manufacturer. Our TP is unchanged at RMB125 (based on 48x 2026E P/E, 1.5SD above the historical average to reflect both the upcycle of hydraulic business and the huge growth potential of precision business). Hengli remains a key pick in our universe. Reiterate BUY.

New ban on foreign robotic devices in the US. The US Federal Communications Commission (FCC) released on 28 Jul that non-US made advanced mobile robots (including humanoids and quadrupeds) and power inverters will be banned from selling in the US (unless exemptions are granted), due to national security concerns. We believe Hengli, a component supplier tied mainly to the US humanoid robot supply chain, will see insignificant impact from such ban.

Risk factors: (1) Slowdown of demand for hydraulic components; (2) slower-than-expected new business development.