CITIC Securities: Medical Device Sector Turning Point, Brain-Computer Interfaces and AI Healthcare in Focus

A research report from CITIC Securities argues that the medical device sector has reached a turning point. For 2026, the brokerage sees opportunities for companies with improving earnings to experience both earnings recovery and valuation repair. In the A-share market, it recommends focusing on investment opportunities related to earnings repair and overseas expansion. In the Hong Kong market, it advises paying attention to the sector effect created by multiple high-quality medical device companies listing in Hong Kong, as well as the opportunity for several segment leaders to gradually release profits and offer low-valuation entry points.

Over the long run, the report says, investment opportunities in medical devices stem from innovation, overseas expansion, and M&A integration. The sector's innovation and internationalization capabilities are being recognized, and its valuation is undergoing a reconstruction. This long-term view suggests that the market is reassessing medical device companies not merely as domestic manufacturers but as globally competitive players with differentiated pipelines and expanding international footprints.

For the short term, CITIC Securities recommends capturing earnings and valuation repair in companies whose 2026 performance is set to improve. The negative effects of centralized procurement or price reductions in high-value consumables and the IVD sector are expected to gradually clear in the second half of the year. Several leaders in niche tracks are likely to see accelerated growth in 2026.

At the same time, the report advises investors to watch new technology directions such as surgical robots and brain-computer interfaces. Technological breakthroughs and commercialization progress in these areas could continue to catalyze sector enthusiasm. These fields are viewed as emerging frontiers that may attract increasing attention from both industry players and capital markets.

In the long term, after the strong rally in innovative drug stocks, the medical device sector's globally competitive incremental and breakthrough innovations are gradually gaining recognition. A group of companies is actively pursuing a second growth curve and achieving high growth in overseas business, which is driving valuation increases. This trend underscores a shift toward more sustainable and internationally diversified growth models.

The report suggests continued focus on innovative medical device tracks with large market space and low domestic penetration. It also highlights thematic investment opportunities in M&A and restructuring, brain-computer interfaces, AI healthcare, surgical robots, and exoskeleton robots. These areas combine technological novelty with substantial unmet clinical needs, making them potential sources of long-term alpha.

Investors should monitor catalysts related to the clinical development, registration, volume ramp-up, and overseas expansion of innovative medical devices. Specific product examples include PFA, RDN, and TAVR. Directions with abundant potential catalysts may produce stocks with multi-fold gains. In the future, AI healthcare and brain-computer interfaces are also expected to become new technology directions that investors closely track.

The report lists several risks, including industry policy risk, R&D falling short of expectations, approval delays, macroeconomic volatility, and Middle East geopolitical risk. These factors could affect the timing and magnitude of the anticipated recovery and valuation repair in the medical device sector.

The brokerage's dual short-term and long-term framework reflects a view that the sector is transitioning from policy-driven headwinds to innovation-driven growth. While procurement reforms have pressured prices in recent years, the report expects these pressures to ease and for the market to refocus on companies with differentiated technology and global ambitions.

For A-share investors, the emphasis is on earnings recovery and overseas expansion, while Hong Kong investors are directed toward the listing wave and undervalued leaders. The report's thematic focus spans both established areas such as high-value consumables and IVD, and emerging fields such as brain-computer interfaces and AI healthcare.