Morgan Stanley: AI proliferation and industrial upgrading drive growth. Optimistic about GEEKPLUS-W (02590) with a target price of HK$37.

Morgan Stanley released a research report stating that the development of China's industrial sector in 2026 will continue to focus on three major themes: the diffusion of AI technology, industrial upgrading, and globalization progress. The advancement of equipment upgrading and policies against "involution" indicate the government's strong intention to enhance productivity, which will benefit high-end equipment manufacturing companies. Morgan Stanley is optimistic about the opportunities for GEEKPLUS-W (02590) to increase its global market share, and believes the company has the potential to successfully transition into a supplier of unmanned warehouse solutions through other intelligent product services. The target price is set at HK$37, with a "hold" rating given. The bank stated that under the leadership of industrial upgrading, the diffusion of AI technology, domestic replacement cycles, and overseas opportunities, the fundamental outlook of China's capital goods is recovering. Benefiting from overseas business growth and value chain shifting, it is expected that profit margins and return on equity will expand. The trends in specific sub-sectors during the up-cycle are becoming clearer. The bank sees automation/Siasun Robot & Automation, battery equipment, and engineering machinery in an upward cycle, while heavy-duty trucks and railway equipment cycles are leveling off, and CECEP Solar Energy equipment is at the bottom of its cycle. AI is driving equipment opportunities with AI infrastructure at its core. AI applications are expected to accelerate in 2026, redefining intelligent manufacturing. Following a strong momentum in 2025, based on the bank's cloud capital expenditure tracking data, it is expected that the global cloud capital expenditure of the top 11 listed cloud service providers will reach close to $620 billion in 2026, and global/Chinese AI capital expenditure will remain strong. In terms of physical AI capital expenditure, the bank believes that the diffusion of AI into the physical world is just beginning, marking the next major phase in the adoption of AI technology. China leads the industry in physical AI investments, benefiting from favorable government policies and funding support, as well as a competitive supply chain ecosystem.