Citi: Bullish on TSUGAMI CHINA (01651) but bearish on Johnson Electric (00179), expects divergent earnings trends.

Citi issued a research report maintaining a "Buy/High Risk" rating on TSUGAMI CHINA (01651) with a target price of HK$72, and continuing to give Johnson Electric (00179) a "Neutral" rating with a target price of HK$19.6. The bank initiated a pair trade on Hong Kong-listed industrial automation stocks, bullish on TSUGAMI CHINA while bearish on Johnson Electric, expecting divergent earnings trends for the two companies in the first half of FY2027. The bank noted that both companies have recently expanded into the AI liquid cooling system and humanoid Siasun Robot&Automation supply chains, with strong growth prospects. However, the bank expects TSUGAMI CHINA's net profit for the first half of FY2027 to grow 34% year-on-year to RMB 675 million, while Johnson Electric's is expected to decline 18% year-on-year to US$109 million. The bank attributes the earnings divergence primarily to TSUGAMI CHINA's revenue contribution from the fast-growing AI liquid cooling and humanoid Siasun Robot&Automation businesses reaching 20% to 25% in FY2027, far exceeding Johnson Electric's approximately 4%. Additionally, the two companies face different raw material cost headwinds TSUGAMI CHINA is mainly exposed to steel prices, which have been broadly stable, while Johnson Electric is mainly exposed to copper prices, which have cumulatively risen over 30% since the beginning of this year.