Why Humanoid Robots Are Next Big Investment Opportunity. What Stocks to Buy?

THE CONTEXT

• Welcome, humanoid robots. They are not science fiction anymore.

China is set to be a massive player in the production and deployment of such robots.

• In factories, they could slash labor costs by a whopping 45% if they take over half the workforce.

That figure comes from a DBS Bank 16-page report. It reckons China's humanoid robot market is set to explode, reaching a mind-boggling RMB574 billion by 2035.

What an astounding growth rate of 47% each year!

• It's not just the robot makers who could benefit from this new demand.

Companies that already supply parts for consumer electronics are able to jump into the robotics space too.

The DBS report points to robot producers like Hong Kong-listed Xiaomi and BYDE, and component suppliers like AAC Technologies and Sunny Optical, as shown below:

• The analysts suggest that valuations in this space are still looking pretty attractive compared to the recent AI frenzy.

Read more below ...

Excerpts from DBS report
Analysts: Jim AU & Lee Keng LING

Great Wall of Robots: A self-sustained rise

• China's humanoid robot market is projected to reach RMB574bn by 2035 (47% CAGR), as 50% adoption could cut labour costs by 45%

• Being overlooked in the humanoid robot trend, consumer electronics suppliers can leverage on supply chain overlap to enter robotics

• China’s electronics hub is shifting to robotics, with in-house adoption driving cost savings; Xiaomi’s 22% cut in labour cost by FY26 a case in point

• Prefer robot producers, Xiaomi and BYDE, over component suppliers, with their established presence and visibility to drive a re-rating.

China’s humanoid robot market expected to soar, in line with global growth.

With Tesla aiming for mass production of humanoid robots by late 2025, global peers are ramping up investments in this area.

Building China's independent humanoid robot ecosystem

Humanoid robots represent a critical competitive frontier among global powers, alongside advanced semiconductors and AI, due to their transformative impact on manufacturing and potential military applications. Given escalating geopolitical tensions, particularly with the US, export bans on humanoid robots and related technologies are likely to be imposed.
-- DBS report

Manufacturing, especially in labour-intensive China, will lead the adoption.

At 50% penetration, labour costs could fall by up to 45%.

We project China’s humanoid robot market to reach RMB574bn in value by 2035, with a 2025-35 CAGR of 47%, in line with global growth of 45%.

China’s humanoid robot market is still in early development, with over 60 manufacturers and no clear dominant leader.

Although UBTECH and XPeng enjoy early market presence and first-mover advantages, it is the ability to manufacture and deploy robots for diverse applications that ultimately determines success.

Significant overlap in supply chains of consumer electronics and humanoid robots, with robots using more optic sensors than EVs, benefiting supply chain players.

China’s electronics hub is shifting to robotics, with Xiaomi and BYDE leading the transition.

Robot components3.25

Xiaomi has the best chance to commercialise humanoid robots among Chinese players, leveraging its expertise in heavy manufacturing, AI investment, and ecosystem integration.

Its humanoid robots could cut labour costs by c.22% in FY26.

BYDE’s internal deployment could boost FY26F earnings by 4%, while Xiaomi may gain 9%.

Robotics valuations still attractive amid boom.

Despite AI stocks doubling since AI’s rise at 2019, humanoid robotics valuations remain reasonable, with Chinese players trading at ~33x forward P/E.

Xiaomi is trading at 1.2 FY25 PEG vs. 1.6 for global peers.

BYDE and supply chain players like AAC and Sunny are trading at 13-27x P/E with 31%-40% FY24- 26F earnings CAGR, more attractive vs global peer Keyence’s c.35x P/E and 9% CAGR.

Full report here.
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Why Humanoid Robots Are Next Big Investment Opportunity. What Stocks to Buy?

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