Report on the Impact of China's Global No.1 Manufacturing Position on A-Share Manufacturing Valuation and Investment Value Screening

Based on the data I collected and the analysis I conducted, I now present a comprehensive research report.

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According to the latest data, China’s manufacturing added value reached

in 2025, with a year-on-year growth of 6.1%, accounting for about 25% of GDP. China’s manufacturing scale is expected to , with an even more prominent advantage of a complete industrial category system[1]. This position provides a solid macroeconomic foundation for the A-share market, mainly reflected in the following aspects:

• Industrial Chain Completeness
  : China has the world’s most complete industrial classification system, covering 41 major industrial categories, 207 medium categories, and 666 minor categories
• Scale Effect
  : The huge market size brings significant cost advantages and bargaining power
• Technology Accumulation
  : While expanding in scale, the transformation towards intelligence and greenization is accelerating

According to analysis from authoritative media such as Economic Weekly, China’s manufacturing industry is transforming from a “big manufacturing country” to a “technology standard setter”, opening up new tracks and shaping new advantages[1]. China’s manufacturing industry will face three major trends in the next five years:

Trend Direction	Specific Performance	Investment Implication
Structural Differentiation	Demand growth slows but structural opportunities remain, high-resilience enterprises navigate the cycle	Leading enterprises’ advantages expand
Green Low-Carbon Transformation	Shift from supply-side emission control to demand-side high-quality development	New energy-related manufacturing benefits
Accelerated Technology Commercialization	Speed-up from cutting-edge technology to commercial application	Valuation reconstruction of hard tech enterprises

In December 2025, China’s official manufacturing PMI index was

, up 0.9 percentage points from the previous month, returning to the expansion range[3]. The enterprise production and operation activity expectation index reached 55.5%, hitting a new high since April 2024, indicating a significant improvement in market confidence.

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As of December 30, 2025, the valuations of major A-share market indices have all increased significantly:

• Wind All-A Index
  trailing P/E ratio: 22.28x
• Shanghai Composite Index
  trailing P/E ratio: 16.57x
• CSI 300 Index
  trailing P/E ratio: 14.19x

Notably,

, marking that the industrial power led by scientific and technological innovation is becoming a new engine driving market development[6].

According to industry analysis data, the valuations of major manufacturing sub-sectors show significant differentiation:

Sub-Sector	Valile Percentile	Industry Prosperity	Expected Growth Rate	Institutional Allocation Ratio
Semiconductor Equipment	85%	88	25%	6.6%
Aerospace	72%	82	18%	4.2%
Industrial Robot	68%	75	20%	3.5%
Photovoltaic Equipment	38%	58	-5%	5.2%
Engineering Machinery	35%	65	12%	2.4%
Household Appliances	45%	78	8%	7.9%

:

• High-growth Sectors
  (semiconductor equipment, industrial robots) have higher valuations but stronger prosperity
• Cyclical Reversal Sectors
  (engineering machinery) are at historically low valuations with significant rebound potential
• Traditional Advantage Sectors
  (household appliances) have reasonable valuations, with prominent allocation value

1. Strengthened Leading Enterprise Premium Logic
   : Scale advantages lead to market concentration, and leading enterprises obtain valuation premiums
2. Emerging Technology Premium
   : Against the background of manufacturing upgrading, enterprises with technical barriers obtain higher valuations
3. Valuation Reconstruction from Overseas Expansion
   : Companies that transform manufacturing share advantages into pricing power obtain revaluation opportunities

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Based on data analysis, we have constructed the following investment screening framework:

Screening Dimension	Core Indicator	High-Quality Standard	Weight
Valuation Dimension	Price-to-Earnings Ratio (PE)	Below industry median or below 15x	25%
	Price-to-Book Ratio (PB)	Below 3x	10%
	EV/EBITDA	Below 10x	10%
Profitability Dimension	ROE	Above 15%	20%
	Net Profit Margin	Above 8%	10%
Growth Dimension	Revenue Growth Rate	Above 10%	15%
Financial Quality	Current Ratio	Above 1.5	5%
	Operating Cash Flow	Positive and stable	5%

Indicator Category	Value	Industry Comparison
Market Capitalization	USD 58.784 billion	Leading enterprise in household appliance industry
Price-to-Earnings Ratio (PE)	13.08x	Significantly lower than industry average
Price-to-Book Ratio (PB)	2.65x	Reasonable range
ROE	20.25%	Excellent level
Net Profit Margin	9.90%	Stable
Current Ratio	1.11	Medium
DCF Intrinsic Value Premium	+99.0%	Significantly undervalued

[0]:

• Conservative Scenario: USD 99.34 (+28.4%)
• Base Scenario: USD 137.13 (+77.3%)
• Optimistic Scenario: USD 225.31 (+191.2%)
• Probability-Weighted Value: USD 153.93 (+99.0%)

[0]:

• Current Price: USD 74.35
• Trend Judgment:
  Sideways Consolidation
• Trading Range Reference: [$73.41, $75.38]
• MACD Signal: No Crossover (Neutral)
• KDJ Signal: Oversold Zone (K:20.6)

:

1. Highly attractive valuation, with PE only 13.08x
2. ROE remains above 20%, with excellent profitability
3. DCF valuation shows nearly double upside potential
4. Leading enterprise in household appliance industry, benefiting from consumption upgrading and intelligent manufacturing transformation

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Indicator Category	Value	Industry Comparison
Market Capitalization	USD 18.461 billion	Leading enterprise in engineering machinery industry
Price-to-Earnings Ratio (PE)	22.60x	Moderately low
Price-to-Book Ratio (PB)	2.54x	Reasonable
ROE	11.23%	Medium
Net Profit Margin	9.57%	Stable
Current Ratio	1.59	Good
DCF Intrinsic Value Premium	-14.0%	Slightly overvalued

[0]:

• Conservative Scenario: USD 14.00 (-36.3%)
• Base Scenario: USD 16.74 (-23.8%)
• Optimistic Scenario: USD 25.96 (+18.1%)
• Probability-Weighted Value: USD 18.90 (-14.0%)

[0]:

• Current Price: USD 15.42
• Trend Judgment:
  Sideways Consolidation
• Trading Range Reference: [$15.23, $15.90]
• MACD Signal: No Crossover (Bullish Bias)
• KDJ Signal: Bullish Bias (K:31.4, D:26.6)

:

1. Absolute leader in engineering machinery industry
2. 15.62% increase in 6 months, 38.07% increase in 1 year[0]
3. Current ratio of 1.59, financially stable
4. Benefiting from recovery in infrastructure investment and equipment renewal policies

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Indicator Category	Value	Industry Comparison
Market Capitalization	USD 17.033 billion	Leading enterprise in aerospace industry
Price-to-Earnings Ratio (PE)	57.89x	Relatively high
Price-to-Book Ratio (PB)	7.79x	Relatively high
ROE	15.87%	Excellent
Net Profit Margin	7.71%	Medium
Current Ratio	1.41	Medium
DCF Intrinsic Value Premium	+132.9%	Significantly undervalued

[0]:

• Conservative Scenario: USD 61.39 (+2.2%)
• Base Scenario: USD 94.88 (+57.9%)
• Optimistic Scenario: USD 263.55 (+338.7%)
• Probability-Weighted Value: USD 139.94 (+132.9%)

[0]:

• Current Price: USD 47.98
• Trend Judgment:
  Sideways Consolidation
• Trading Range Reference: [$47.07, $48.89]
• MACD Signal: No Crossover (Bullish Bias)
• KDJ Signal: Bullish Bias (K:62.3, D:52.3)

:

1. Core target in aerospace industry, benefiting from increased defense spending
2. DCF valuation shows huge upside potential (+132.9%)
3. ROE of 15.87%, with good profit quality
4. Beta of only 0.19, low correlation with the market

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Based on the above analysis, we conduct a comprehensive score for the three key targets:

Evaluation Dimension	Midea Group	Sany Heavy Industry	AVIC Helicopter
Valuation Attractiveness	★★★★★	★★★☆☆	★★☆☆☆
Profitability	★★★★★	★★★★☆	★★★★★
Growth Potential	★★★★☆	★★★☆☆	★★★★★
Financial Soundness	★★★★☆	★★★★★	★★★★☆
Industry Position	★★★★★	★★★★★	★★★★★
DCF Valuation Advantage	★★★★★	★★☆☆☆	★★★★★
Comprehensive Score	92	78	85

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Based on the above analysis, we put forward the following investment strategies:

• Lowest valuation (PE 13.08x), sufficient margin of safety
• 99% DCF valuation premium, maximum upside potential
• ROE above 20%, strong profitability
• Suitable for
  conservative investors

• Aerospace track, high prosperity
• 132.9% DCF valuation premium
• Benefiting from national defense modernization and high-end manufacturing upgrading
• Suitable for
  aggressive investors

• Engineering machinery cycle hits bottom
• 15.62% increase in 6 months, upward trend
• Benefiting from infrastructure investment and equipment renewal policies
• Suitable for
  cyclical investors

Based on industry attractiveness analysis, we recommend focusing on the following sub-sectors:

Priority Level	Sub-Sector	Recommendation Logic
First Tier	Semiconductor Equipment, Industrial Robot	High Growth + High Prosperity
Second Tier	Aerospace, Engineering Machinery	Cyclical Reversal + Policy Support
Third Tier	Household Appliances, Auto Parts	Reasonable Valuation + Leading Enterprise Advantage

1. Macroeconomic Risk
   : Manufacturing recovery falls short of expectations
2. Policy Risk
   : Changes in subsidy policies may affect some sectors
3. International Trade Risk
   : Export-oriented enterprises face tariff uncertainties
4. Valuation Volatility Risk
   : Valuations of high-growth sectors may fluctuate significantly
5. Technology Iteration Risk
   : Changes in technical routes may affect enterprise competitiveness

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China’s continuous No.1 global manufacturing scale provides a solid macro foundation and structural opportunities for the A-share manufacturing sector. Currently, the valuation of the manufacturing sector presents a

; high-growth sectors have higher valuations but stronger prosperity, while cyclical sectors are at historically low valuations with significant rebound potential.

:

1. Manufacturing scale advantages support valuation premiums for leading enterprises
2. Against the background of industrial upgrading, technology-based manufacturing enterprises obtain revaluation opportunities
3. Screening leading targets should comprehensively consider valuation, profitability, growth and financial quality
4. Midea Group, Sany Heavy Industry, and AVIC Helicopter represent three investment styles: conservative, cyclical, and growth respectively

It is recommended that investors select high-quality targets with

in manufacturing sub-sectors for allocation based on their own risk preferences.

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[1] China’s Manufacturing Industry Expected to Grow Steadily in 2026 and Enter a Stage of “Large and Strong”

[2] 2025 Investment Outlook for Machinery Industry: Valuation Continues to Recover for Small and Medium Market Capitalization Enterprises

[3] China - Official Manufacturing Purchasing Managers’ Index PMI - MacroMicro

[4] 2025 A-Share Investment Outlook: Steady Progress, Slow Bull Market Expected

[5] RatingDog China General Manufacturing PMI®

[6] A-Share This Year: Structural Changes and Valuation Reconstruction - Sina Finance

[7] Gilin AI Database - Financial and Valuation Data of Listed Companies