3Q earnings: Strong orders, supply constrained

北方华创(002371)
    NAURA reported 3Q26 revenue of RMB11.3bn (+1.3% YoY/14.9% QoQ) andnet profit of RMB2.0bn (+5.2% YoY/16.5% QoQ). The YoY deceleration inrevenue (2Q26 growth: +24% YoY) reflected material shortages in selectproduct categories as mgmt. noted that orders continued to grow and shipmentsincreased significantly, suggesting that delivery constraints, rather than demandweakness, were the main bottleneck. GPM fell 2.0ppts YoY and 1.0ppt QoQ to38.3% in 3Q26, reflecting higher component iteration and upgrade costs duringnew-product validation and discounts for certain high-volume customers.Maintain BUY. As China’s leading platform-based semi manufacturingequipment supplier, NAURA remains a key beneficiary of the structurallocalization of the SPE sector. We trim our TP to RMB750 based on 50x2027E P/E (52x prev.), slightly above its one-year historical forward average of48x.
    Order momentum remains firm, but material availability isconstraining delivery. AI-related semi demand, domestic capacityexpansion and equipment localization continued to support market-sharegains across etching, thin-film deposition, thermal processing, wet cleaning,ion implantation, track and bonding equipment in 9M26. Mgmt. notedcontinued order growth and a significant increase in shipments, althoughshortages of certain materials limited revenue conversion. Inventory rose11.1% QoQ to RMB33.9bn by 3Q26, while contract liabilities remainedbroadly stable at RMB5.3bn. The inventory build supports future deliveriesbut highlights the importance of supply-chain execution and customeracceptance. We lower our FY26E/27E revenue forecasts by 4.1%/2.3%.
    Higher R&D investment and GPM pressure continued to constrainoperating leverage. In 9M26, R&D expenses increased 17.2% YoY toRMB3.85bn, while selling expenses rose 41.4% to RMB1.21bn as NAURAexpanded its market-development and customer-service resources.Meanwhile, 9M26 GPM declined 2.0ppts YoY to 39.4%, mainly due tohigher component iteration and upgrade costs during new-productvalidation and commercial discounts for selected high-volume customers.Accordingly, we reduce our FY26E/27E GPM assumptions by0.1ppt/0.4ppt.
    Revenue visibility remains solid, with execution and margin recoverynow the key variables. NAURA’s broad product portfolio, growing orderbase and increasing process coverage should support its medium-termoutlook. Near-term performance will however depend on improved materialavailability, faster product validation and customer acceptance. Key risksinclude prolonged supply-chain constraints, slower customer acceptance,intensifying price competition, etc.

Overseas growth remained strong; domestic business expected to bottom out after VBP

南微医学(688029)
    Micro-Tech reported 9M26 revenue of RMB2.5bn (+5.7% YoY), accounting for72% of our previous FY26 forecast, modestly below the historical average of74%. Attributable net profit declined 18.3% YoY to RMB416mn on FX losses.Excluding RMB105mn of FX losses and related tax effects, 9M26 attributablenet profit would have increased 4.8% YoY to RMB503mn. For 3Q26, revenuedeclined 3.3% YoY to RMB788mn as the domestic business was under VBPpressure, while overseas sales maintained rapid growth. 3Q26 gross marginwas 62.5%, down 1.4ppt YoY, as overseas mix improvement was offset by FXand domestic price pressure. Looking ahead, we expect continued overseaspenetration and innovation should remain the main growth drivers. We believethe national VBP should largely clear domestic pricing risk over the next severalyears and the domestic business will bottom out in 2027E and return to growthin 2028E.
    Overseas growth remains robust. 3Q26 overseas revenue increased over20% YoY to ~RMB590mn, or approximately 25% in constant currency,accounting for ~75% of total sales. Revenue from Americas increased 35%YoY in 3Q26, supported by expanding product coverage, and strongerchannel reach following the acquisition of three Conmed product lines.Revenue from Europe rose a solid 16% YoY, led by Italy and Spain, whileAPAC was held back by yen weakness. Innovative products also remainedstrong overseas, with overseas revenue from innovative products in 3Q26up 38% YoY.
    Domestic business is expected to bottom out as 7th national VBPcompleted. 3Q26 domestic revenue fell 38.4% YoY to ~RMB200mn, mainlydue to channel de-stocking ahead of VBP implementation. We believe thechannel inventory has now been largely cleared. Importantly, the Companywon broadly in the 7th national VBP, in 21 categories in total, which shouldsupport further share consolidation. While near-term revenue and marginpressure is unavoidable, we think the national VBP materially reduced thedomestic policy overhang. In our view, domestic business may bottom outin 2027E as VBP-driven volume growth is expected to largely offset the ASPdecline. Form 2028E, innovative products should become a main driver tosupport domestic business to return to solid growth.
    Maintain BUY. We cut FY27-28E attributable net profit toRMB600mn/RMB733mn to reflect the GPM pressure due to VBP. However,we roll forward our DCF valuation basis from FY26E-35E to FY27E-35E asmarket focus increasingly shifts to FY27E. WACC and terminal growthassumptions are unchanged. Therefore, we derive our TP of RMB93.52based on a 9-year DCF model. Risks: lower-than-expected volume growthfollowing VBP implementation, overseas expansion deceleration, FXvolatility.

3Q earnings：Record quarterly margin while share-price correction appears overdone

生益科技(600183)
    Shengyi Tech(SYT)delivered strong3Q26results,with revenue rising78.8%YoY/30.3%QoQ to RMB14.18bn and net profit surging238.4%/61.6%toRMB3.44bn,both ahead of Visible Alpha(VA)consensus.SYT’s GPM reacheda record41.6%,up from32.6%in2Q26,driven by a richer high-end AI-relatedproduct mix,new-product shipments and operating leverage from capacityramp-up despite raw-material inflation.PCB subsidiary Shengyi Electronics(688183CH,NR)reported3Q revenue of RMB3.76bn,up23.0%YoY,and netprofit of RMB801mn,up37.1%,with GPM of36.6%(vs.33.7%in2Q),indicatingstronger margin uplift in CCL.We raise FY26/27E revenue forecasts by4.8%/1.0%and GPM by3.6ppt/3.5ppt on stronger margin resilience and mixupgrades.Maintain BUY and TP of RMB190on34x FY27E P/E(vs.40xpreviously),slightly below its2-SD above its average1-yr forward P/E onmarket rotation towards non-AI sectors and reduced investor appetite forAI-related names,rather than any deterioration in SYT’s fundamentals.
    AI demand drove broad-based growth across CCL and PCB.The CCLbusiness benefited from strong demand for high-end products,increasingprofit contributions from newly developed products,timely capacity ramp-upand continued sales-mix optimization,supporting higher sales volume,revenue and gross profit.SYE’s9M26revenue increased39.8%YoY toRMB9.55bn,while net profit rose71.5%to RMB1.91bn.PCB earningscontinued to outpace revenue growth,supported by robust AI-computingdemand,higher utilization and a rising contribution from high-value-addedproducts.
    Margins:Stronger CCL contribution drove SYT’s GPM outperformance.SYT’s3Q26GPM of41.6%was5.0ppt above SYE’s GPM of36.6%,pointing to a stronger mix and operating-leverage benefits in the CCLsegment.PCB profitability also remained healthy,supported by higherutilization and a richer mix of high-layer-count and high-density products.
    Capacity expansion and product upgrades support further growth;maintain BUY.Capex increased76.1%YoY to RMB3.00bn in9M26asSYT continued to invest in high-end CCL and PCB capacity.We expectsustained AI-server and data-center demand,further product-mix upgradesand new-capacity ramp-up to remain the key earnings drivers.We believethe recent share-price correction should have been overdone given SYT’searnings potential(25-28E CAGR:77.2%based on our estimates).Keyrisks include:Slower-than-expected capacity ramp-up,raw-materialinflation,change in tech roadmaps,etc.

3Q26 earnings：Solid fundamentals amid supply chain tightness

中际旭创(300308)
    Innolight reported3Q26revenue of RMB27.8bn,up172%YoY/24.6%QoQ.Netprofit reached RMB8.6bn,up174%YoY/8.5%QoQ,while net profit excludingnon-recurring items increased to RMB9.0bn,up190%YoY/22.3%QoQ.GPMexpanded to46.6%,continuing to accelerate from46.1%/46.4%in1Q/2Q26,supported by strong800G/1.6T shipments,a favorable product mix andoperating leverage.Fair-value losses on equity investment and FX lossesrelated to the H-share proceeds weighed on earnings,masking strongerunderlying profitability.We view the recent share price weakness as largelysentiment-driven rather than a reflection of operating performance,andmaintain BUY with unchanged TP at RMB1400(26x2027E P/E).
    Demand visibility and margins remain solid.The Company disclosedduring earnings call that major overseas hyperscalers’orders alreadyextend into2027,while certain key clients have provided explicit demandguidance for2028.Product pricing remained broadly stable in3Q26,andthe Company described the current pricing environment as healthy andcustomer quotations as rational.Although DSP supply remains tight,mgmt.indicated that the Company has sufficient supply to support deliveries,reinforced by strategic relationships and LTAs with core suppliers.
    NPO is expected to ramp from2H27E.Mgmt.expects2.4T/NPO/XPO toenter initial volume production in2H27,followed by faster scale-updeployment in2028.The Company has already commenced jointdevelopment and sample deliveries with select key clients.Opticalinterconnects currently account for only c.5%of global AI capex,per mgmt.,while this share is expected to increase to c.10%or more over the long termas scale-out/-up/-across/-in applications expand.Mgmt.expects200G-per-lane to remain mainstream through2027-2028E,with400G-per-lanesolutions beginning to emerge in2028E.
    Maintain BUY.Despite the recent share-price correction and geopoliticalrisk overhang,we see no imminent or material deterioration in Innolight’sfundamentals or global leadership in high-speed optical interconnects.Order visibility,pricing,margins and supply-chain execution remain solid.Key risks include supply chain disruptions,change in tech upgraderoadmaps,geopolitical uncertainties,etc.

AIDC gen-sets growth on track; Attractive valuation after pullback

潍柴动力(000338)
    In the post-results call, Weichai revealed that AIDC gen-sets delivery is on agood track and is confident of maintaining a resilient ASP due to the shortageover the coming 2-3 years. Power business (including non-AIDC) accountedfor 30% of total profit in 3Q26, up from 25% in 9M26, which has served as akey earnings growth driver. For HDT engines, by leveraging the partnershipwith Sinotruk (3808 HK, BUY), FAW (000800 CH, NR) and Foton (600166 CH,NR), Weichai is confident of enjoying the growth of HDT export going forward.We continue to like Weichai given the solid outlook of AIDC gen-sets. Besides,trading at only 5x 2026E EV/EBITDA which is below the historical average of6x, Weichai’s current valuation has yet to reflect AIDC gen-sets growthpotential. Maintain BUY with unchanged SOTP-based TP ofHK$44.7/RMB38.9 for Weichai H/A. Weichai remains a key pick in the CapitalGoods sector.
    3Q26 results highlights: Weichai’s revenue grew 1% YoY to RMB58bnin 3Q26. Gross margin expanded 1.5ppts YoY to 22.9%. Affected by FXloss and fair value change, EBIT increased only 2% YoY to RMB5.1bn. Netprofit dropped 9% YoY to RMB2.96bn, due to higher effective tax rate.
    AIDC gen-sets: Weichai revealed that sales volume of AIDC diesel gensets in 3Q26 reached 1.3k units, up from 500/800 units in 1Q/2Q26. Fornatural gas gen-sets, the delivery is expected to be only 200 units this yearas Weichai has allocated the capacity for diesel gen-sets. Looking into2027E, Weichai expects the ramp-up of gas gen-sets will be similar to thatof diesel gen-sets in 2026. We maintain our gas gen-sets sales forecast of2k units in 2027E, as we see the deal between Generac (GNRC, NR) andAmazon (AMZN US, BUY, covered by our internet team) offers gooddemand visibility.
    SOFC: Weichai maintained the target of 30MW capacity (phase one) to becompleted by end-2026. Production is expected to be 15-20MW in 2027E,as time is needed for ramp-up. Weichai expects 200MW capacity (phasetwo) to be completed by end-2027E.

Overseas localization as key after 3Q26 miss

长城汽车(601633)
    Maintain BUY. Great Wall's 3Q26 net profit missed our estimate by 36% asgross margin fell 1.0ppts QoQ. Great Wall has higher international exposurethan some of its peers, as its YTD overseas sales volume exceeded half oftotal deliveries. It has been expanding global footprint outside Russia in bothsales and production in a bid to mitigate trade risks.
    3Q26 miss on GPM. Great Wall’s 3Q26 revenue fell 5.7% YoY toRMB57.8bn, trailing our forecast by 3.0%. GPM fell 1.1ppts YoY and1.0ppts QoQ to 17.3%, coming in 1.1ppts lower than our prior forecast.Management attributed it to launch-stage incentives and ramp-up costs fornewly introduced models in China, while reiterating a healthy overseasGPM. Combined SG&A and R&D ratio fell 1.0ppt QoQ to 10.9%, 0.2pptsbetter than our forecast. Net profit fell 40.7% YoY and 10.4% QoQ toRMB1,362mn, missing our estimate by 36%.
    Overseas localization expansion to mitigate tariffs and supports longterm upside. Overseas markets accounted for about 52% of Great Wall’stotal wholesale volume in the first nine months this year, with locallyproduced vehicles comprising 35%-45% of total overseas deliveries.Management projects overseas capacity to reach 250,000-300,000 unitsin FY26E (including 220,000 units in full-process manufacturing facilitiesacross Russia, Brazil and Thailand), with further expansion targeted forFY27E. Its KD plant in Bulgaria provides strategic positioning to mitigateupcoming EU tariffs on Chinese hybrid vehicles. Management still seessubstantial overseas growth potential and expects locally producedvehicles to achieve superior profitability over CBUs (Complete Built Units)over time, potentially exceeding consensus expectations.
    Earnings forecasts. We expect 4Q26E sales volume to rise 9.3% QoQ toabout 0.37mn units, supported by new models (the H10, new Lanshan andOra models). We expect year-end bonus accruals to drive down GPM by1.1ppts QoQ and increase the combined SG&A and R&D ratio by 2.7pptsQoQ in 4Q26E. We forecast 4Q26E net profit to rise 7.8% YoY toRMB1.3bn, assuming the receipt of RMB2.0bn in Russia’s recycling-feereimbursements. We cut both FY26-27E net profit forecasts by 30% toRMB5.3bn and RMB6.4bn, respectively, reflecting structural policyheadwinds (export VAT rebate reduction and battery consumption taxincrease) and uncertainties surrounding Russia’s recycling-fee refunds.
    Valuation/Risks. We maintain our BUY rating and cut our H-share targetprice from HK$14.00 to HK$8.50, still based on 10x FY27E P/E. Our Ashare target price is adjusted to RMB18.20, based on a 150% A/Hpremium. Key risks to our rating and target prices include lower salesvolume and margins than we expect, as well as a sector de-rating.

Overseas growth remained solid; domestic recovery should broaden in 2027E

迈瑞医疗(300760)
    Mindray reported3Q26revenue of RMB9,350mn(+2.9%YoY;+6.0%currency-neutral),taking9M26revenue to RMB27.1bn(+4.9%YoY;+7.4%currency-neutral).Net profit declined2.5%YoY to RMB2,517mn in3Q26and3.2%YoY toRMB7,564mn in9M26,mainly reflecting FX losses and higher component costs.Excluding FX,net profit grew1.8%YoY in3Q26and6.3%YoY in9M26.Withdomestic destocking being largely completed by year-end and overseas momentummaintained,we expect Mindray’s growth to accelerate into2027E.
    Overseas business remained the main growth driver.Overseas revenuereached RMB14.4bn in9M26,up11.0%YoY,or16.0%YoY in USD terms,accounting for53%of total revenue.Revenue from Europe increased~20%YoYthanks to the rapid growth in the UK,France,Germany and Italy.Latin Americaand APAC revenue grew~18%and~14%YoY,respectively,where India,Mexico and Brazil etc.all reported robust growth.In addition,Mindray expandedcooperation with a major US IDN from monitoring and anaesthesia to ultrasoundrecently,which should provide incremental support to its growth in America from2027E,in our view.Overseas IVD remained strong,which increased~20%YoYin9M26,with immunoassay up more than30%.Mindray received35new TLAorders and completed20TLA installations in9M26,which we expect to drivecontinued rapid growth of overseas IVD business.
    Domestic business was resilient despite a higher base in3Q25.Domesticrevenue declined~1%YoY to RMB4.5bn in3Q26but rose2.0%QoQ.Withinthis,domestic IVD grew4%QoQ while immunoassay increased7%QoQ.Mindray’s combined share in chemistry,immunoassay and coagulation hasincreased from10%in1H25to15%in3Q26,according to the Company.Domestic TLA new orders and installations were nearly400and300in9M26,respectively,which have surpassed the total in FY25.We think these will supportfuture reagent volume growth.Moreover,domestic emerging business reportedrevenue growth of20%YoY in9M26.As channel destocking is expected tolargely complete by year-end,we expect domestic growth to improve in2027E,led by IVD share gains and continued expansion in emerging businesses.
    Emerging businesses are becoming a more meaningful growth contributor.Revenue from emerging businesses grew20.5%YoY to RMB4.7bn in9M26,andreached17.5%of total sales.Minimally invasive surgery and intervention bothgrew more than20%YoY,with surgical high-value consumables more thandoubled and PFA procedures exceeded10,000in9M26.We see emergingbusinesses as an increasingly important driver of Mindray’s medium-termearnings growth.
    Maintain BUY.We roll forward our DCF model to2027E-34E from2026E-34E,as valuation is increasingly anchored on2027E.We cut our earnings forecastsmodestly to reflect raw-material cost pressure.Therefore,we derive our TP ofRMB214.84based on an8-year DCF model.Key risks include FX volatility,IVDpricing pressure,weaker hospital procurement and slower overseas expansion.

3Q26 revenue beat; share-gain spend crimps earnings beyond expectations

珀莱雅(603605)
    Proya’s 3Q26 revenue rose 29.8% YoY to RMB2,253mn, well above ourexpectations. However, recurring attributable NP fell 65.2% YoY to RMB79mn,below our expectations, due to trimmed GPM and rising selling ratio.FlowerKnows consolidation and rapid growth in emerging brands reinforced thebroader portfolio’s contribution to sales. The Ruby Cream 4.0 launch and Douyinexpansion also lay the groundwork for future growth, although heavierinvestment and a lower gross margin from shifting brand and category mixweighed on near-term profitability. The group’s growth drivers are broadening,and the early Double 11 performance indicates that investment in 3Q26 isstarting to pay off. We maintain BUY and retain our earnings forecasts and TPof RMB89.58, based on a target P/E of 30x.
    The broader portfolio supported sales. 1) Established brands areshowing signs of improvement: Proya’s 3Q26 revenue fell by single digitsYoY, dropping its share of group revenue below 50%. Management reportedstrong Double 11 presales for Ruby Cream 4.0 (>1mn units) and the Yunbaiseries (>RMB100mn), which could help stabilize flagship-brand sales.TIMAGE’s YoY decline narrowed to single digits in 3Q26. 2) Emergingbrands maintained strong momentum: OR (>50% YoY in 9M26), AwakenSeeds (+103.5% YoY in 1H26) and INSBAHA (>100% YoY in 9M26).
    A more balanced channel mix highlights omnichannel strengths. Thegroup’s channel mix became more balanced in 9M26, as offline revenuegrew by high double digits YoY and accounted for a larger share of totalrevenue. Among online platforms, Douyin’s contribution to flagship-brandrevenue surpassed Tmall’s (30%+ v.s. 25%+). Proya remains an industryleader in omnichannel execution.
    Lower GPM and heavier selling expenses squeezed core profitability.GPM fell 4.9ppts YoY to 69.8% in 3Q26 on lower margin of FlowerKnows,higher offline contribution and changes in brand and category mix. Theselling ratio rose 3.5ppts YoY to 53.4%, driven by Ruby Cream 4.0 launchspending, investment in emerging brands, and higher traffic costs andspending on Douyin. Recurring NPM fell 9.6ppts YoY to 3.5%, suggesting anear-term focus on market share over profitability.
    Valuation: We maintain BUY and retain our TP of RMB89.58, based on anunchanged target P/E of 30x. Despite a larger-than-expected decline in3Q26 recurring NP, we maintain our full-year forecasts for now, supportedby greater earnings contribution in 4Q and the solid start to Double 11.Risks: slower-than-expected core-brand recovery, traffic-cost hike, andweaker-than-expected earnings contributions from emerging brands.

Sluggish overseas revenue growth in 3Q26 due to wars

中联重科(01157)
    Zoomlion’s net profit in3Q26declined26%YoY to RMB859mn,due to weakrevenue growth(+5%YoY),lack of other gains and the increase in sellingexpenses.Based on our understanding,the sluggish revenue growth was dueto weak overseas growth(+1%YoY in3Q26)arising from the wars in theMiddle East and Ukraine.We trim our earnings forecasts in2026E/27E/28E by9%/5%/3%,due to lower sales volume and higher cost assumptions.Accordingly,our TPs for Zoomlion A/H are reduced to RMB10.7/HK$8.2,basedon an unchanged2026E target P/E multiple of18.6x for A-share and30%discount for H-share.We maintain our target P/E as we expect the potentialending of wars will help Zoomlion resume growth.Zoomlion will host investorcall at15:00(HKT)today.
    3Q26earnings highlights:Revenue in3Q26grew5%YoY toRMB12.9bn(China+10%YoY;Overseas+1%YoY).Gross margincontracted0.2ppt YoY to27.8%.Given the lack of other gains in3Q26(~RMB388mn in3Q25)and a28%YoY increase in S&D expenses,EBITdropped32%YoY to RMB1bn.Net profit declined26%YoY toRMB859mn.
    Valuation:Our A-share target P/E(18.6x unchanged)is based on the five-year average historical P/E of13.7x plus1SD.Our above-average targetmultiple intends to reflect Zoomlion’s emerging market expansion story.Our H-share TP is based on a30%discount to A-share.
    Key risks:(1)weaker-than-expected demand in China;(2)slowdown ofoverseas growth due to regional conflicts;(3)input cost pressure.

Highest 3Q26 earnings growth among major players

三一重工(600031)
    SANY Heavy(SANY)’s net profit in3Q26grew20%YoY to RMB2.3bn,withthe growth rate accelerating from17%YoY in2Q26.The strong earningsgrowth was driven by revenue growth of17%YoY(Overseas:+20%,China:+12%)and0.4ppt YoY expansion of gross margin.Most importantly,SANY’searnings growth in3Q26was the highest among major construction machineryplayers.We continue to like SANY’s solid execution in the overseas market.Maintain BUY rating with unchanged A/H TP of RMB26.2/HK$27.5(unchanged24x2026E P/E for A-share,equivalent to0.5SD above the average of20xsince2017,to reflect the earnings upcycle).Our H-share TP is based on10%H/A discount.
    Post-results conference call:SANY will host investor call at15:00(HKT)today.
    Key risks:(1)Slowdown of overseas demand;(2)further appreciation ofRMB rate;(3)decline in mining capex.

4Q26 could be key for assessing FY27E earnings

比亚迪(002594)
    Maintain BUY.BYD’s3Q26net profit missed our forecast by12%with severaltransitional factors.We view4Q26margin realization as key for assessing itsFY27E earnings trajectory.We also believe BYD’s first-mover globalmanufacturing footprint could help mitigate trade risks.
    3Q26earnings miss on ASP,GPM and impairment.BYD’s3Q26revenue expanded13.6%YoY to RMB221.5bn,trailing our prior forecastby3.5%.GPM in3Q26widened by0.6ppts YoY but narrowed by0.9pptsQoQ,lower than our projection by0.4ppts.SG&A and R&D expensedcombined were largely in line.Impairment losses reached RMB1.7bn in3Q26,or about RMB750mn higher than our projection.Consequently,3Q26net profit rose28.1%YoY to RMB10.0bn,falling RMB1.4bn short ofour estimate.Net profit per vehicle rose by1.8%QoQ to about RMB7,600.
    4Q26margin realization serves as a key signal for FY27E profitability.We believe that multiple transitional factors distorted3Q26results,including the initial rollouts of a few2nd-generation blade battery models,forex loss and larger-than-expected impairment losses.Margin impactcould be more intangible in4Q26E when the production of new modelsramps up.We view4Q26margin execution as a critical signal forassessing FY27E earnings.
    First-mover advantage in European localization.Mass production at itsHungary plant is scheduled for4Q26,making BYD one of the first Chineseautomakers to operate a fully integrated EU manufacturing processencompassing stamping,welding,painting and final assembly.This localfootprint provides structural insulation against upcoming EU import quotasand tariff burdens on Chinese hybrid vehicles.BYD’s Brazil plant,operational since2025,demonstrates strong early execution,with thecompany currently seeking regulatory permits to double annual capacity to600,000units.
    Earnings/Valuation.We cut our FY26E net profit forecast by5.2%following3Q26miss,implying a net profit of RMB11.9bn in4Q26E.Wemaintain our FY27E sales volume forecast of5mn units and trim net profitby2.2%to RMB42.2bn,assuming lower impairment and forex losses.Wemaintain our BUY rating but cut H-share target price from HK$125toHK$109,based on20x(prior22x)our revised FY27E EPS to reflectpersisting sector headwinds.We cut A-share target price from RMB125toRMB108based on YTD AH premium of17%.Key risks include lower salesvolume margins than we expect,as well as a sector de-rating.

3Q26 earnings: Margin inflection takes shape

豪威集团(603501)
    OmniVision reported revenue of RMB8.12bn in 3Q26, up 3.8% YoY and 6.7%QoQ, near the upper end of company guidance. Net profit declined 8.7% YoYbut increased 50.5% QoQ to RMB1.08bn, as GPM recovered 1.7ppts QoQ to30.0% despite a further increase in lower-margin distribution sales. Althoughdemand recovery in smartphone/auto CIS remains subdued, the marginimprovement suggests that earnings have begun to emerge from cyclical trough.The company’s 4Q26 revenue guidance of RMB7.76-8.32bn implies -4.5% to+2.5% QoQ growth, while guided GPM of 29.4-30.7% points to broadly stableprofitability. Maintain BUY with TP unchanged at RMB125 (33x 2027E P/E).
    Mix improvement is beginning to outweigh distribution dilution. 9M26semi design revenue declined 9.4% YoY to RMB16.35bn, while distributionrevenue rose 55.7% to RMB5.69bn and reached 25.7% of sales. Based onour calculation, distribution accounted for ~30% of 3Q26 revenue. Therecovery in consolidated GPM to 30% despite this unfavorable mix indicatesa more substantial margin improvement within the design business,supported by higher-end CIS and value-added analog products. We see thisas an encouraging sign as earnings recovery is increasingly driven byproduct upgrading rather than low-margin volume expansion.
    Optical connectivity, edge AI and auto are emerging growth drivers.OmniVision is extending its analog expertise into TIA, laser drivers andsilicon-based optical-interconnect devices. Certain high-speed opticalcommunication chips have entered production introduction, while broaderscale-up is targeted for late-2027, per mgmt.. Machine vision, robotics andprofessional imaging should remain strong, while higher-end auto CIS &analog and flagship smartphone products support further mix improvement,in our view.
    We view margin inflection as credible but likely gradual. Mgmt.’s 4Q26guidance points to broadly stable revenue and margins QoQ, suggestingnear-term earnings improvement will rely more on product-mixenhancement and cost discipline than a broad demand rebound. MaintainBUY with an unchanged TP of RMB125 as improving margins in higherend CIS and analog products are increasingly offsetting the dilution from thegrowing distribution business. Key risks include weaker-than-expectedsmartphone and auto shipments, slower new-product qualification, delaysin emerging businesses, etc.

Resilient demand driving accelerated growth in 3Q26

康龙化成(300759)
    Pharmaron’s earnings growth accelerated in3Q26,with revenue rising20.9%YoY and non-IFRS adj.net profit attributable to shareholders increasing24.7%YoY,outpacing the growth of17.9%and20.3%YoY,respectively,in1H26.Notethat the growth of adj.net profit consistently exceeded that of revenue through2026,indicating strengthening operating momentum.New bookings of9M26increased by more than30%YoY,led again by the>40%YoY growth of CDMObusiness.Mgmt.maintained its2026E full-year revenue growth guidance of15–20%and expressed confidence in margin improvement in the near future.
    Resilient demand and business momentum across all segments.1)Laboratory services revenue grew17.5%YoY in3Q26(vs13.7%YoY in1H26),while9M26bookings increased over25%YoY,accelerating from20%+YoY in1H26.Such growth was supported by complex small moleculesand new modalities,including PROTACs,molecular glues,RIPTACs,conjugates,cyclic peptides and oligonucleotides,alongside deeperpenetration among MNC and AI-enabled drug discovery customers.2)3Q26CDMO revenue rose30.1%YoY(vs32.8%YoY in1H26),with9M26bookings up over40%,maintaining the strong momentum of1H26.Late-stage and commercial demand remained robust,with sizable deliveries forcertain European pharma clients driving the acceleration of Top-20customerrevenue in the quarter.Mgmt.expects more high-potential programs to enterlate and commercial stages with production of certain key projects alreadywell scheduled,marking its CRDMO business model to enter a harvestphase.To accommodate the rising demand,mgmt.targeted capex to reachmore than RMB3.0bn in2026E and to remain elevated in2027E.3)Clinicaldevelopment services revenue increased18.0%YoY in3Q26(vs14.2%YoYin1H26),with9M26bookings up over25%.Mgmt.saw an inflection inChina’s clinical CRO market following intense competition since2022.
    Margin well positioned to expand down the road.We expect margins totrend upward for Pharmaron.Per mgmt.,FX reduced9M26gross profitmargin(GPM)by c.2ppts.Laboratory services’3Q26GPM declined3.4pptsYoY,primarily reflecting RMB appreciation against the US dollar.Underconstant FX,the segment GPM would be stable to slightly higher,accordingto mgmt.CDMO GPM expanded1.6ppts YoY and4.5ppts QoQ in3Q26,demonstrating benefits from a richer mix of late-stage and large-scaleprojects,higher utilization and more flexible production scheduling.Small-molecule CDMO GPM exceeded35%in9M26,and mgmt.targets35–40%over time,assuming successful large-project deliveries.Clinical GPMimproved2.3ppts YoY and1.0ppt QoQ in3Q26.China’s CRO marketinflection should support further margin recovery.Collectively,these trendsunderpin mgmt’s goal for adj.net profit to outgrow revenue in the near future.
    Maintain BUY.We expect Pharmaron’s revenue to grow by18.3%/19.5%/17.8%YoY and non-IFRS net profit to increase by22.8%/23.8%/19.8%YoYin2026E/27E/28E,respectively.Our DCF-based TP remains unchanged atRMB56.00(WACC of9.32%;terminal growth of2.0%;both unchanged).

Accelerated backlog growth with further guidance raise in 3Q26

药明康德(603259)
    WuXi AppTec (WXAT) delivered another strong quarter: 3Q26 revenue rose38.0% YoY, with continuing-operations revenue up 43.5% YoY, while adj. nonIFRS net profit increased 61.3% YoY. Notably, backlog as of end-3Q26 reachedRMB76.74bn, up 36.4% YoY, accelerating from 25.2% YoY as of end-2Q26. Permgmt., 9M26 new bookings increased over 60% YoY, providing furtherfundamental support for earnings outlook. Once again, mgmt. raised 2026revenue guidance to RMB61.0–61.9bn from RMB58.5–60.5bn and continuingoperations growth to 40–42% YoY from 35–39% YoY. Mgmt. maintained itsstable adj. non-IFRS net-margin outlook, and narrowed capex guidance toRMB8.0–8.5bn from RMB7.5–8.5bn.
    Continuously exceptional growth and pipeline expansion within WuXiChemistry. WuXi Chemistry remained the principal growth engine for WXAT,with 3Q26 revenue up 48.6% YoY. Small-molecule D&M revenue grew 54.5%YoY, moderating from 72.7% in 1H26 but still benefiting from high-qualitymolecule inflows, pipeline progression into later stages and proactivecapacity deployment. Mgmt. expects Small-molecule D&M revenue to growover 50% YoY in 2026. TIDES revenue rose 51.6% YoY, accelerating from44.3% in 1H26 and leading mgmt. to guide up TIDES growth to ~47% in 2026.The segment added eight Phase III or commercial projects in 3Q26, bringing9M26 additions to 23, the highest in Company’s history. The start of the newChangzhou site underscores mgmt's confidence in sustained demand.Overall, WXAT now has 20 plants for small molecules and peptide projectsat various stages of design preparation, construction or launch readiness.
    Broad-based acceleration of early-stage services. WuXi Testing's 3Q26revenue grew 32.7% YoY, versus 31.5% in 1H26, underpinned by robustsafety-assessment revenue growth of 40.6% in 9M26. WuXi Biology revenuerose 14.4% YoY in 3Q26, improving from 11.2% in 1H26. Small-moleculedrug discovery within Chemistry grew 16.8% YoY, sharply above 1H26's5.6% YoY. Together, these trends indicate improving early-stage R&Ddemand, with AIDD customers and new modalities providing incrementalopportunities for WXAT as global biotech funding continues to recover.
    Normal volatility of quarterly margins. Although 3Q26 GPM and NPMdeclined sequentially from 2Q26, 9M26 GPM/ adj. NPM still expanded 7.6ppt/8.3ppt YoY, respectively. Quarterly fluctuations are normal in our view, giventhe project mix, delivery schedules of key projects, new-capacity ramp-up andFX movements. Mgmt. aims to share part of its efficiency gains withcustomers and employees rather than maximizing near-term margins. Wetherefore view the sequential margin moderation in 3Q26 as normal quarterlyvolatility, with profitability remaining resilient.
    Maintain BUY. To factor in the strong momentum of Chemistry segment, weraise our earnings forecasts, expecting revenue to grow by 35.1%/ 18.7%/15.7% YoY (for continuing operations: 41.4%/ 18.7%/ 15.7% YoY) and adj.net profit to grow by 68.4%/ 18.8%/ 14.4% YoY in 2026E/ 27E/ 28E,respectively. Hence, we raise our DCF-based TP from RMB170.00 toRMB190.00 (WACC: 9.39%, terminal growth: 2.00%; both unchanged)

3Q26 EBIT +25% YoY largely in-line; Precision industries to beat full-year guidance

恒立液压(601100)
    Hengli’s 3Q26 EBIT growth of 25% YoY reflected a slight acceleration from the22% growth in 2Q26. Affected by the reduction of other gains, net profit in 3Q26grew 9% YoY to RMB717mn. The results are broadly in line with ourexpectation. In the post-results call, management revealed that (1) precisionindustries segment (ball screws & linear guideways) achieved RMB250mnrevenue in 3Q26, which will likely exceed previous guidance for the full year(~RMB400mn). The segment is expected to turn profitable in 2027E; (2) Mexicoproduction base is expected to achieve RMB500mn revenue in 2027E; (3)Regarding US AD/CVD on foreign hydraulic cylinders, Hengli’s Mexicoproduction base currently satisfies 60-70% of US customers’ demand. Theproportion will increase to 100% in 2027E. Hengli continues to believe that suchduties will increase the cost of competitors as well, and therefore see the impactas neutral to slightly positive. We maintain our positive stance on Hengli withunchanged TP of RMB132 (based on 42x 2027E P/E). Our target multiple isbased on 1SD above the historical average to reflect both the upcycle ofhydraulic business and the growth potential of precision industry business.
    Key highlights in 3Q26 results: Revenue in 3Q26 grew 30% YoY toRMB3.4bn. Gross margin contracted 2ppts YoY to 40.2%. Selling &distribution expense ratio slightly increased 0.2ppts YoY to 2.5%, due to (1)74% YoY increase in exhibition expense and the distribution of one-offbonus for sales team. Administrative expense ratio expanded 0.3ppts YoYto 6.4%, due to (1) increase in depreciation, (2) increase in workforce, and(3) increase in tax consultant expense. In 9M26, net profit increased 3%YoY to RMB2.15bn, accounting for 65% of our full-year forecast (run rate in9M25: 76%).
    Risk factors: (1) Slowdown of demand for hydraulic components; (2)slower-than-expected new business development.

3Q26 earnings: Continued margin expansion fueled by AI demand

深南电路(002916)
    SCC delivered strong 3Q26 results, with revenue/net profit rising 66.3%/94.4%YoY and 20.4%/34.0% QoQ to RMB10.48bn/RMB1.88bn. Net profit was nearthe upper end of the profit alert range, while NPM expanded to 17.9%, from16.1% in 2Q26 and 15.3% in 3Q25. GPM also improved to 34.9%, vs.32.4%/31.4% in 2Q26/3Q25, driven by robust AI infrastructure demand, a richerproduct mix, high capacity utilization and the continued ramp-up of theGuangzhou plant. We adjust up the revenue estimates by 9.3%/9.8% and GPMestimates by 0.5ppt/0.3ppt in FY26/27E on surging demand and more favorableproduct mix. Maintain BUY but lower our TP to RMB432 from RMB462, aswe reduce our target multiple to 31x 2027E P/E from 37x, broadly in line withthe peer average.
    AI demand and product upgrades drove broad-based growth.According to mgmt., continued investment in AI infrastructure supporteddemand for AI servers, high-speed switches, optical modules, processorsand memory-related substrates. High capacity utilization, product-miximprovement and the Guangzhou plant ramp-up altogether drove earningsgrowth. In 9M26, revenue/net profit increased 53.8%/77.5% YoY toRMB25.77bn/RMB4.13bn, while GPM expanded 4.4ppt to 32.6%. Net profitgrew 87.8% despite higher finance expenses and lower government-relatedincome, indicating solid underlying profitability.
    AI-related products and new capacity to drive the growth outlook. Weexpect AI-related PCBs, BT substrates, FC-BGA and ABF products toremain the key growth drivers into 2027E, supported by capacity expansionin Guangzhou, Thailand, Nantong and Wuxi. Further margin upside willdepend on product-mix improvement and utilization gains to more thanoffset raw material inflation, ramp-up costs and incremental depreciation.
    Key risks include weaker hyperscalers’ capex, slower client qualification,slower capacity ramp-up, etc.

3Q26 preview: NPAT to hit quarterly trough while OPAT remained robust

中国平安(601318)
    Ping An is scheduled to report3Q26quarterly earnings on28Oct(Wed)post-market.We expect Group OPAT to grow8.1%YoY in9M26(1H26:+8.3%),implying broadlyintact3Q growth of7.6%YoY(vs1Q/2Q26:+7.6%/+9.0%)unaffected by the quarterlycapital market volatilities.Group NPAT could drop29%YoY in9M26per our estimate(vs.1H26:+36%),dragged by sharp A-share market corrections as CSI300/SHCOMPindex was down13%/6%in3Q26(vs.3Q25:+18%/+13%).NAV could rise3.0%fromyear-start,flat QoQ,as a combined result of1)higher fair value gains from OCI equitiesi.e.the CSI Dividend/CSI High Dividend Low Vol index rose9%/10%in3Q26and PingAn’s higher-than-most-peers OCI stock exposure(1H26:66%);2)China’s10yr govt.bond yield trending lower in3Q,which could boost OCI bonds’fair value,offset by the3)increase in liability reserve charge.NBV could see a double-digit decline,which weestimate to fall14%YoY in9M26.This was weighed by an industry-wide salesslowdown and a one-off negative impact on margin given the high comparative set priorto actuarial assumption changes by end-FY25.Despite an anticipated recovery in4Q,we revise down our full-year NBV growth forecast to bake in the3Q26lag.P&Ccombined ratio could be better than expected and we forecast to improve0.5pct YoYto96.5%in9M26.Maintain BUY with our H/A-share price target unchanged atHK$81/RMB73.
    3Q NPAT to hit a quarterly trough within the year while OPAT stayed robust.We expect Group NPAT to decline29%YoY in9M26,mainly weighed by A-sharemarket headwinds in3Q26(CSI300/SHCOMP:-13%/-6%,vs.3Q25:+18%/+13%),offsetting1H investment gains.Despite this softness,Ping An couldoutperform peers in3Q IFRS net earnings given its greater exposure to OCI stocksthan peers(1H26:66%in stock mix/9.6%of insurance funds vs.peers’average of40%/4.7%).Group OPAT could grow8.1%YoY in9M26,translating into a7.6%YoY lift in3Q,of which we expect the L&H,PAB,and AM segments to remain soliddrivers.
    NBV to fall on premium slowdown and a margin high-base.We forecast NBVto decline14%YoY in9M26(vs.1H26:+11%),dragged by an industry-wide salesslowdown against a strong comparative prior to the PIR cuts in Sep2025,the feed-through impact of tighter bancassurance regulation,and a one-off negative marginimpact given the base set before the actuarial assumption changes by end-2025.4Q NBV recovery could come along with the ramp-up of the2027jumpstart sales,yet the agency force would still need more time shifting towards life products withextended payment terms.We revise down our FY26E NBV growth forecast to4%.
    P&C COR likely better than previous estimates.We estimate P&C combinedratio to improve0.5pct YoY to96.5%in9M26despite under the backdrop ofincreasing natural catastrophe(NAT CAT)claims in3Q.The COR improvementcould be a result of1)ongoing tightening of expense control,allowing the decreaseof expense ratio more than offset the increase in claims ratio(CMBI est);2)robustunderwriting prints in1H26left space for claims on major catastrophes in3Q26.On the premiums front,we maintain our forecast on low single-digit growth in9M.
    TP unchanged; yield topped among peers. The stock is trading at 0.47x FY26EP/EV and 0.7x FY26E P/B with an avg. 3yr forward ROE >13% and a yield closeto 7% amid recent share price corrections, standing as the highest among peers.We expect a clearer guidance on 4Q-to-date life sales momentum and updates forthe 2027 jumpstart sales during the call. Maintain BUY, with our H/A-share TPunchanged at HK$81/RMB73 which implies 0.8x FY26E P/EV and 1.2x FY26E P/B
    Key risks: 1) regulatory tightening on life insurance and financial conglomerates; 2)heightened equity market volatility; 3) a prolonged low-interest rate environment; 4)intensified pricing competition in P&C industry; 5) asset quality deterioration; and 6) asignificant decline in Group capital level weighing on DPS growth, etc.
    Company description: Founded in 1988, Ping An is a leading financial conglomeratewith businesses spanning life and P&C insurance, pension, banking, brokerage, trust,and other financial services. The company pursues a technology-empowered growthstrategy across core financial businesses of insurance, banking, brokerage, and assetmanagement. As of FY25, Ping An ranked as the second-largest Life and P&C insurerin China by total written premiums. The banking business segment is operated by itssubsidiary Ping An Bank (000001 CH, 58% Group stake), which has a focus on retailand SME businesses. Ping An Healthcare and Technology (1833 HK, 53% Groupstake) was listed in May 2018 as China’s first listed internet-health company.

2Q26 earnings signal enhanced cost discipline

比亚迪(002594)
    Maintain BUY. We view BYD’s 2Q26 earnings as resilient despite bottom-lineperformance missing by revenue drag and higher impairment losses. Webelieve tightening cost control, marked by stabilizing 1H26 R&D spend andslowing D&A growth, underscores long-term margin resilience anchored bysuperior scale and vertical integration.
    2Q26 GPM beat; net profit missed on revenue and impairment. BYD’s2Q26 revenue fell 3.2% YoY to RMB195bn, or 8.6% lower than our priorforecast. GPM expanded 0.1ppts QoQ to 18.9% in 2Q26, the highest since2Q25, and 0.5ppts higher than our projection. SG&A and R&D expenseswere largely in line while impairment losses were about RMB1.1bn higherthan our forecast. Net profit surged 30% YoY to RMB8.2bn, yet trailing ourprojection by 15%. Excluding impairment, net profit per vehicle was aboutRMB8,900 (RMB300 below our estimate).
    Stricter cost control unlocks earnings upside. Total R&D investment in1H26 declined 6.5% YoY, signaling cost stabilization, while the R&Dcapitalization ratio rose from 4% in 1H25 to 19% in 1H26. Totaldepreciation and amortization only rose 5% YoY in 1H26, the slowest pacesince 1H20. We expect cost reduction efforts to become increasinglypronounced in the next few years, as BYD’s production capacity, salesnetwork and R&D resources have been well established, especially inChina. We believe BYD’s greater economies of scale and verticalintegration could result in more resilient profitability than most peers, asevidenced by its robust 1H26 GPM.
    2H26 and FY27 outlook. We maintain our FY26E sales volume forecastof 4.5mn units with overseas contributing 40%. We cut FY26E revenueforecast by 1% following 2Q26 ASP miss but raise FY26E GPM by 0.2pptsand trim R&D expenses by 9%. Accordingly, we raise our FY26E net profitby 3% to RMB36.1bn. We project FY27E sales volume to rise 11% YoY to5.0mn units, aided by overseas markets. We expect stringent cost cuts toextend into FY27E and thus we revise up our FY27E net profit by 5% toRMB44.1bn.
    Valuation/Key risks. We maintain our BUY rating and H-share target priceof HK$125.00, still based on 22x our revised FY27E P/E. Our unchangedA-share target price is based on the current A/H premium of 18%. Key risksto our rating and target prices include lower sales volume or margins thanwe expect, as well as a sector de-rating.

1H26 in line; overseas momentum and domestic recovery intact

迈瑞医疗(300760)
    profit decreased3.6%YoY to RMB5.05bn,mainly due to FX losses.ExcludingFX impact,net profit grew8.7%YoY in1H26.We leave our2026E-28E revenueforecasts largely unchanged,which continue to assume a recovery in thedomestic business and sustained solid growth overseas.We lower our2026Eearnings forecast to reflect near-term FX headwinds,while keeping our2027E-28E earnings estimates broadly unchanged.
    Overseas businesses remained strong led by Europe and emergingmarkets.Overseas revenue reached RMB9.5bn(+13.7%YoY;+18.4%inUSD terms),accounting for53%of the total in1H26.Europe remained thestandout,with revenue up nearly25%YoY.Key markets including the UK,France and Italy each delivered growth of over30%YoY.Latin Americagrew nearly20%YoY,while APAC rose17%YoY in1H26,supported bystrong performance in India,Mexico and Brazil.Notably,growth was broad-based across product lines.Overseas IVD revenue increased21%YoY,with immunoassay up30%YoY.Overseas PMLS grew over10%YoY,andoverseas ultrasound delivered high-single-digit growth.We expect Europe,Latin America and APAC to drive continued double-digit overseas growth in2026E.
    Domestic recovery appears to be underway.Domestic revenue wasRMB8.3bn(-1.6%YoY),but we estimate2Q26already returned to positivegrowth(+~8.8%YoY).Emerging businesses and IVD are increasingly themain growth engines domestically.In1H26,domestic emerging businessesrose21%YoY and accounted for24%of domestic revenue;together withIVD,they represent74%of total domestic revenue.Mindray continued togain market share in core IVD categories(CLIA,chemistry,coagulation),with share rising from10%in1H25to14%in1H26.Its TLA installed basealso expanded rapidly.In1H26,Mindray secured over260new TLA ordersand completed nearly200installations,driving an upward revision to its full-year TLA order intake target.Therefore,we continue to expect domesticrevenue to resume single-digit growth in2026E,supported by IVD sharegains,continued growth in emerging businesses,and an easier comparisonbase.
    Maintain BUY.We maintain our FY26E-28E revenue forecasts largelyunchanged and derive our target price of RMB204.94based on a9-yearDCF model(WACC:9.1%,terminal growth:3.0%;both unchanged).Risks:centralized procurement-driven price cuts;domestic procurement demandweakness;overseas expansion underperformance.

Exports,customer mix to drive margin recovery

广汽集团(601238)
    Maintain BUY.GAC’s2Q26net loss widened QoQ on selling expenses andequity income,despite revenue beat.Management raised FY26E export targetby20%,which may result in margin improvement in2H26E.That,along withimproving Aion retail customer mix and continuous cost reduction efforts,coulddrive multi-year GPM recovery,in our view.
    2Q26revenue beat,brand-building expenses drag.GAC’s2Q26revenue rose16%YoY and beat our estimate by13%to RMB26.3bn.GPMimproved slightly to-2.4%(vs.-2.7%in1Q26and-4.9%in2Q25),beatingour forecast of-3.1%.Net loss in2Q26widened by almost RMB3.2bn QoQto RMB3.8bn on larger selling expenses(Aistaland’s brand building andnetwork build-out,as well as homegrown brands’overseas channelexpansion)and weaker equity income(GAC Honda’s wider net loss with30%QoQ sales volume decline).
    Margin recovery on exports and customer mix improvement.Following a132%YoY surge in1H26overseas sales volume,management raised its FY26E export target to0.3mn(from0.25mn),or~39%of our homegrown volume forecast.Overseas gross margin isguided at~8%this year,significantly outperforming domestic negativemargins.Localization efforts continue to mitigate tariff risks,with seven KDplants in operation.Meanwhile,Aion’s domestic customer mix is improving,with ride-hailing accounting for~20%in1H26(vs.~50%in FY25).Suchtrends,coupled with a15%cost-reduction target in FY26,we expect GPMto recover to-1.2%in2H26E,+0.6%in FY27E and+2.7%in FY28E.
    Aistaland rollout on track;JV outlook diverges.The first Huawei co-developed model,Aistaland GT7,launched on26Jun with298saleschannels(40%Huawei-authorized)in operation,following by the2ndmodel GX7in Sep.GAC Toyota remains resilient,with a denser2027-28NEV pipeline supporting our stable RMB2.1-2.2bn annual equity incomecontribution during FY26-28E.Upcoming models at GAC Honda willincorporate HarmonyOS cockpits and Momenta ADAS solutions.Weproject GAC Honda’s net loss to narrow in FY27-28E.
    Earnings/Valuation.We now project GAC’s FY26-28E net loss to beRMB9.9bn/6.5bn/4.2bn,respectively.We maintain BUY and cut H-sharetarget price from HK$4.20to HK$3.60,based on a SOTP valuation:HK$2.85per share for homegrown businesses at0.2x FY27E P/S(loweredfrom0.3x due to larger net loss projection);and HK$0.75per share for JVsand associates at an unchanged3.0x FY27E equity-income P/E.Our A-share target price of RMB8.60reflects a175%A/H premium.Key risksinclude lower sales volume/margins,further JV earnings erosion,higheroverseas risks than we expect,and a sector de-rating.

Overseas strength offsets domestic pressure; eyes on upcoming national VBP

南微医学(688029)
    In 1H26, Micro-Tech reported revenue of RMB1,728mn, up 10.4% YoY. Attributablenet profit decreased 16.5% YoY to RMB303mn mainly due to RMB83mn of FXlosses. Excluding FX losses and related tax effects, adjusted attributable net profitrose 16.4% YoY. Given the upcoming 7th national VBP, we cut our 2026E/27Eearnings estimates by 12%/7%, respectively. However, with overseas revenueaccounting for over 60% of total sales, we believe strong overseas growth shouldhelp offset near-term domestic headwinds and support resilient revenue growththrough 2026-27E. Notably, following the 7th National VBP, most of the Company'smajor products will have completed nationwide VBP, which we believe shouldlargely clear domestic pricing risk over the next several years.
    Overseas business remains the key growth engine. 1H26 overseas revenueincreased 20.6% YoY to RMB1,094mn, raising its revenue contribution to 63%.Growth was broad-based across APAC, EMEA and the US, with each regiongrowing by more than 20% YoY. Direct sales coverage continued to expandthrough both organic buildout and M&A, reaching 36.7% of total revenue(+4.7ppts YoY). This helped drive overseas gross margin up 1.1ppts YoY to66.2%. In the US, hospital accounts continue to ramp and represented about40% of total US revenue in 1H26. With the acquisition of three product linesfrom CONMED, we expect better access to hospital and GPO channels in theUS, which may drive rapid US growth and improved profitability.
    Domestic business faces near-term VBP-related pressures. Domesticrevenue fell 3.6% YoY to RMB634mn in 1H26. Within this, we estimate domestictumor intervention revenue decreased ~40% YoY due to delays in VBPimplementation for tumor ablation consumables. GI revenue grew a modest2.3% YoY to RMB556mn, reflecting proactive channel destocking after theadvance VBP notice in June. We expect the national VBP to be implemented inearly 2027E, suggesting domestic growth pressure could persist through 2H26Eand into 2027E.
    Eyes on tender outcomes of the 7th National VBP in Sep 10, 2026. The 7thNational VBP, officially announced on Aug 26, covers 23 GI interventioncategories. Micro-Tech obtained demand volume in 21 categories, ranking No.1in twelve and No.2 in five. Dominant volume shares in hemostasis clips (49%)and cholangioscopes (62%) highlighted its strong market leadership. In ourview, while domestic revenue and margin will come under short-term pressure,past VBP cycles suggest leading players typically gain market share. And weexpect the innovative products such as cholangioscopes, and ERCP productsthat used to be dominated by MNCs to see faster post-VBP penetration.
    Maintain BUY. We lower our 2026E-27E earnings forecasts to reflect upcomingVBP pressure. Accordingly, we lower our TP to RMB90.60 based on a 10-yearDCF model (WACC: 10.7%, terminal growth rate: 2.0%). Risks: deeper VBPprice erosion, overseas growth underperformance.

Net profit in 2Q26 +57% YoY helped by other income and expense control; Rising AIDC power contribution

潍柴动力(000338)
    Weichai’s net profit in 1H26 grew 36% YoY to RMB7.7bn, which implies netprofit of RMB4.6bn in 2Q26 (+57% YoY). The growth in 2Q26 was driven byinvestment income and sound expense control. While revenue grew only 9%YoY in 1H26, we continue to see rising contribution of power-related engines,with AIDC backup power engine sales surging 1.3x YoY. We maintain ourpositive stance on Weichai’s AIDC backup engine and SOFC. Maintain BUYwith unchanged SOTP-based TP of HK$45.1/RMB40.2 for Weichai H/A.Weichai remains a key pick in the Capital Goods sector.
    Improved mix in engine segment. Weichai’s total engine sales grew 15%YoY to 415k units in 1H26. Exports of 44k units, which grew 18% YoY,accounted for 11% of total engines sales in 1H26. Large-bore enginesgrew 31% YoY to 6.7k units, of which engines for AIDC surged 1.3x YoYto 1.4k units. Total power-related engine sales volume grew 31% YoY to65k units, which accounted for 16% of total engine sales in 1H26.
    Engine EBIT dropped 2% YoY in 1H26. Engine segment revenue grew15% YoY to RMB37.3bn. However, the segment profit decreased 2% YoYto RMB5.4bn in 1H26 (segment margin -2.5ppt YoY to 14.6%), which isslightly weaker than our expectation.
    Strong HDT segment margin despite slow volume growth. Weichaidelivered 76k units of HDTs in 1H26, up only 4% YoY. Sales in Chinadropped 2% YoY to 45k units, while exports grew 15% YoY to 31k units.The segment EBIT surged 4.6x YoY to RMB1.4bn, with segment marginsharply expanding 3.2ppt YoY to 3.9%.
    Forklifts & supply chain solution (KION Group) EBIT continued torecover. The segment EBIT in 1H26 surged 2.1x YoY to RMB3bn, helpedby a low base arising from the high expenses related to the “efficiencyprogram” in 1H25. The segment margin reached 6.6% in 1H26.

二季度业绩超预期；PCB与封装基板加速放量

深南电路(002916)
    深南电路1H26实现收入/归母净利润人民币152.96/22.51亿元，同比+46.3%/+65.6%；2Q26实现收入/归母净利润87.01/14.01亿元，同比+53.4%/+61.3%，环比+31.9%/+64.8%，单季毛利率为32.4%，三项指标均高于彭博一致预期。我们认为AI算力订单增长、产品结构升级、BT载板高稼动率、FC-BGA量产及广州工厂爬坡是主要驱动力。维持“买入”评级，将2026/27年收入预测上调10%/15%，毛利率预测上调1.8/2.5个百分点，目标价上调至人民币462元，基于37倍2027年市盈率，与可比公司均值相若。
    三项业务全面增长，封装基板贡献主要业绩弹性。1）1H26PCB收入85.52亿元，同比+36.3%，毛利率36.85%，同比+2.43个百分点；数据中心相关订单收入突破20亿元，高速交换机、光模块及AI服务器需求是主要驱动力。2）封装基板收入36.67亿元，同比+110.8%，毛利率31.35%，同比+16.20个百分点，受益于存储、PMIC订单增长及FC-BGA规模化量产。据管理层，ABF上半年收入约2亿元、全年有望超过6亿元，但仍处于亏损爬坡阶段；BT高稼动率则支撑基板盈利改善。3）电子装联收入19.76亿元，同比+33.7%，毛利率17.30%，同比+2.32个百分点，主要受数据中心项目量产及订单结构改善推动。
    扩产支撑中期增长，关注投产及折旧压力。期末在建工程32.48亿元，较年初+75.5%；上半年投资活动现金净流出46.76亿元，净流出规模约为去年同期的3倍。广州广芯累计投入47.76亿元，据管理层，公司正继续投入原约60亿元规划中的剩余约20亿元，主要扩充BT及存储载板产能，预计4Q26投产。泰国和南通四期仍在爬坡，管理层表示上半年亏损有所收窄。无锡AI项目总投资45.36亿元、建设期12个月，期末进度22.5%，尚未投产；后续贡献取决于建设投产、客户认证、订单导入、良率及稼动率提升。
    未来展望：我们预计下半年AI算力景气延续，新产能爬坡有望支撑增长，毛利率则取决于产能利用率提升能否覆盖原材料涨价及新增折旧。广州、泰国和南通项目爬坡，以及无锡项目建设，将进一步打开中期产能空间；若建设、认证及订单导入顺利，无锡AI项目有望于2027年逐步贡献增量。建议关注原材料价格传导、汇率波动及其对财务费用的影响、新产能爬坡、无锡项目进度，以及客户提前下单对订单节奏的扰动。主要风险包括成本传导滞后、汇率波动、AI资本开支不及预期、产能或认证进度低于预期，以及汽车和消费电子需求疲软。

Transition before turnaround; maintain HOLD

卓胜微(300782)
    Maxscend released1H26results.Revenue rose6.2%YoY to RMB1.81bn,while net loss widened to RMB371mn;2Q26revenue reached RMB982mn(+3.6%YoY/+18.7%QoQ),but net loss deepened to RMB226mn,both belowBloomberg consensus.GPM fell12.4ppts to16.4%,as low fab loading,depreciation,pricing pressure and module ramp costs overwhelmed miximprovement.Maxscend is simultaneously digesting legacy inventory,executing its Fab-Lite transition and pivoting toward optical interconnect.Withdemand recovery uncertain and utilization subdued,we cut FY26E/FY27Erevenue by2.1%/2.4%and GPM by11.7ppts/9.6ppts.Maintain HOLD andlower TP to RMB74.2,based on40x2027E EV/EBITDA,similar to1-SD belowthe historical mean.
    Module growth outpaced discrete,but margins lagged.In1H26,RFmodule revenue climbed22.9%YoY to RMB929mn,lifting its sales mix to51%,as L-PAMiD shipments accelerated and Wi-Fi7scaled;Wi-Fi8alsoentered small-volume shipments.In contrast,RF discrete sales fell8.3%YoY to RMB824mn amid soft handset demand and ongoing inventorydigestion.The richer module mix has yet to translate into profitability,asmodule GPM fell15.6ppts to13.1%,while discrete GPM dropped10.5pptsto17.8%.We expect volume growth,yield improvement,greatercustomization and cost-down to underpin a gradual margin recovery.
    Fab utilization remains the key earnings swing factor.Xinzhuo Fab’srevenue increased43.8%YoY to RMB694mn in1H26,while its net lossnarrowed to RMB256mn from RMB337mn in1H25.The12-inch fab hasmonthly capacity of9k wafers and has been running at roughly50–60%utilization,per mgmt.,while the6-inch filter line has reached15kwafers/month.Utilization improved from1Q26and should continue rising in2H26,although mgmt.does not expect a high FY26level.We believe adurable turnaround requires both higher loading and better unit economicsthrough yield gains,cost down,and enhanced pricing.
    Optical interconnect extends the platform’s runway but also raises theexecution bar.Maxscend is repurposing its SOI and SiGe capabilities foroptical and electrical chips used in AIDCs.First-generation SiGe electrical-chip products are under collaboration,while the SiPho process platform isstill undergoing finalization.The April placement’s RMB3.46bn net proceedsprovide sufficient funding,but customer qualification and volume productionremain distant milestones,in our view.We therefore assign no materialnear-term earnings contribution.Key upside risks include faster utilizationrecovery,stronger L-PAMiD wins or earlier optical validation;key downsiderisks include weak demand,slower qualification,intensifying competition,etc.

Platform strength drives solid growth; Maintain BUY

北方华创(002371)
    NAURA reported 1H26 revenue of RMB20.16bn (+24.9% YoY) and net profit ofRMB3.37bn (+5.1%). In 2Q26, revenue reached RMB9.84bn (+24.0% YoY, -4.7% QoQ) and net profit was RMB1.74bn (+6.6% YoY, +6.2% QoQ), both belowBloomberg consensus. Earnings growth lagged revenue due to higher R&D andselling expenses and GPM pressure. In 2Q26, GPM fell 1.4ppts QoQ to 39.3%,and mgmt. attributed the pressure to higher component iteration and upgradecosts during new-product validation and discounts to selected customers.Positively, OCF reached RMB3.77bn in 1H26, supported by stronger collections.As China’s largest platform-based semiconductor equipment provider, NAURAremains well positioned for domestic substitution, while China’s WFE sectorremains our top thematic pick. Correspondingly, we revise down our FY26/27Esales forecasts by -2.5%/-2.3% and GPM by -0.4/-1.1ppts. Maintain BUY withTP adjusted to RMB814, based on 52x 2027E P/E, 1-SD above its historicalaverage.
    Equipment growth remained broad-based, but segment marginsdeclined in 1H26. Electronic process equipment revenue, includingsemiconductor and vacuum/new-energy equipment, rose 25.9% YoY toRMB19.20bn, accounting for 95.3% of total revenue; GPM fell 2.0ppts to39.8%. The growth was driven by market share gains in etching, thin-filmdeposition, thermal processing and wet cleaning, volume shipments of ionimplantation and track systems, and batch deliveries of bonding equipment.Kingsemi’s consolidation further broadened product coverage. Componentrevenue rose 5.5% YoY to RMB915mn, while GPM declined 4.2ppts to46.2% amid stronger competition and downstream pricing pressure. NAURAis targeting higher-value applications, including AI computing, data centersand high-end industrial markets, to support its product-mix upgrade.
    Higher spending supports product penetration but delays operatingleverage. In 1H26, R&D expenses increased 28.9% YoY to RMB2.68bn, andselling expenses rose 63.5% YoY to RMB761mn due to larger sales andservice teams and Kingsemi’s consolidation. These investments supportqualification across additional process steps. New ICP etching, ion-beametching, hybrid-bonding and high-end TSV electroplating systems expandNAURA’s exposure to advanced logic, memory and advanced packaging.Meanwhile, the improvement in OCF in 1H26 strengthened cash conversion.
    Order indicators support revenue visibility while margin recoveryremains the key earnings variable. In 1H26, inventory and contractliabilities reached RMB30.5bn and RMB5.3bn, up 6.7% and 26.6% QoQ,respectively, indicating a solid production pipeline and stronger customerprepayments. Key risks include slower product validation, intensifying pricecompetition, persistent GPM pressure, weaker semiconductor capex, etc.

1H26 earnings boosted by one-off gain; organic momentum still soft

珀莱雅(603605)
    Proya's 1H26 revenue was broadly flat at RMB5,375mn (+0.2% YoY), whileattributable NP rose 46% YoY to RMB1,168mn. The increase was due to a oneoff investment gain of RMB445mn on the step-up of consolidation ofFlowerKnows (花知晓). Excluding the one-off gain, recurring NP fell 14% YoYto RMB664mn, with underlying net margin down to 13.9% from 15.4% in 1H25.Declining flagship-brand sales and a higher selling-expense ratio suggest thecore business is still bottoming. We maintain our BUY rating and keep our 30xtarget P/E multiple unchanged, yet cut our TP by 31% to HK$89.58, mainly aswe switch to recurring core EPS to remove one-off distortions and roll over ourvaluation base year to 2026E.
    Soft top line and rising online traffic costs dampen organicprofitability. In 1H26, Proya brand and TIMAGE, accounting for nearly 80%of revenue, fell 7% and 22% YoY, respectively. Group revenue held flat onlyon fast-growing but sub-scale brands (OR +71%, INSBAHA +222%). Grossmargin lifted 0.9ppts YoY to 74.3% on dual sourcing, but the selling-expenseratio rose 3.5ppts to 53.1% on a higher mix of high-spend incubation brandsand rising Douyin traffic costs. Compounded by a 1.1ppt rise in the adminexpense ratio, core net margin fell 2.0ppts YoY, and organic profitability hasyet to trough. In the near term, a flagship recovery depends on delivery ofthe Ruby Cream 4.0 relaunch and the September upgrade of the Yuanliseries, in our view.
    FlowerKnows: strategic value beyond the one-off gain. Postconsolidation, the group's online make-up share ranks behind only L'Oréaland Estée Lauder, widening its lead over domestic peers. As Proya's firstcontrolling acquisition, the deal also adds previously untested M&A and postdeal integration capability. We view M&A as the necessary route for singlebrand-reliant Chinese beauty companies to evolve into international multibrand groups — a path on which Proya is among the front-runners. Longerterm, smooth integration and portfolio build-out could support a valuation rerating toward multi-brand groups level.
    Valuation. We maintain BUY and keep our 30x target P/E multipleunchanged, but cut our TP by 31% to HK$89.58, on 1) switching of theearnings anchor from attributable to recurring core EPS, removing large nonrecurring items such as consolidation gain so that valuation tracks thecompany's organic earnings power, 2)roll-over of the valuation base year to2026E; . The stock trades at 20x 2026E P/E, with the payout ratio at around50%. Risks: slower core-brand recovery, traffic-cost hike, and weaker-thanexpected integration of acquired brands etc.

2H26 earnings inflection with attractive valuation

长城汽车(601633)
    Maintain BUY.Great Wall's2Q26results were in line with its profit alert,withASP beating our forecast on a record export mix.We see an earnings inflectionin2H26E,driven by the expected receipt of RMB3-4bn in Russian recycling-fee reimbursement by Dec2026,new model ramp-ups(such as the H10),andstabilizing selling expenses following the completion of its direct-sales networkexpansion.Exports—now accounting for more than half of total sales volumewith structurally higher margins—underpin earnings quality,while the Guiyuanplatform should revive domestic sales,in our view.
    2Q26core profit in line,revenue beat.Great Wall's2Q26net profit ofRMB1,519mn(-67%YoY,+61%QoQ)fell within its profit-alert range ofRMB1.4-1.7bn.The YoY decline was mainly due to the delayed recognitionof about RMB2.0bn of recycling-fee reimbursement in Russia(vs.RMB2.3bn recognized in2Q25);excluding this drag and adverse forex,core net profit was largely flat YoY.Revenue rose9%YoY to RMB57.0bn,4%above our forecast,driven by a record quarterly ASP of RMB181,000(+8%YoY).GPM remained resilient at18.3%(vs18.8%in2Q25).
    Prioritizing profit over volume.We cut our FY26E sales volume forecastby30,000units to1.35mn units(0.7mn units for exports and0.65mn unitsfor domestic market),as it appears to us that Great Wall continues toprioritize profitability over volume.This implies2H26sales volume of about0.77mn units,up31%HoH and2%YoY.Factoring in a higher exportcontribution offset by year-end bonus accruals,we expect2H26GPM tonarrow0.5ppts HoH to17.9%.We conservatively assume RMB3.0bn ofrecycling-fee reimbursement to be received in2H26.Accordingly,we trimour FY26E net profit by1.3%to RMB9.2bn.For FY27E,we lower salesvolume forecast from1.6mn to1.53mn units but expect rising exports andthe Guiyuan platform to support margins,bringing our FY27E net profitforecast to RMB10.9bn(-7.5%).
    Valuation/Key risks.We maintain BUY and cut our H-share target pricefrom HK$19.00to HK$14.00,now based on10x FY27E P/E(prior12x),toreflect compressed sector-wide valuation multiples.Our A-share targetprice is adjusted to RMB25.00,based on the current A/H premium of about110%.Key risks to our rating and target price include lower sales volumeand margins than we expect,as well as a further sector de-rating.

Key takeaways from post-results call

恒立液压(601100)
    We have several positive takeaways from the post-results call: (1) Loss inMexico operation reduced in 2Q26 (vs 1Q26), and we now forecast the fullyear loss to be ~RMB100mn (i.e. RMB20mn loss in 2H26E); (2) Precisionindustry (excluding ball screw) is expected to turn profitable in 2027E; (3)Demand for hydraulic components for excavators is strong, with potentiallymore order intakes for medium size cylinders for excavators from the majorUS construction machinery customer in 4Q26E; (4) Ball screws forhumanoid robots capacity is on track to reach 100k units in the near term,and is expected to reach 1mn units in 3-5 years, according to the company.We trim our 2026E earnings forecast by 3%, as we incorporated FX loss in1H26 and slightly lower margin assumptions. We maintain our positivestance on Hengli and roll over our TP to RMB132, based on 42x 2027E P/E(previously 48x 2026E P/E). Our target multiple is based on 1SD above thehistorical average to reflect both the upcycle of hydraulic business and thegrowth potential of precision industry business. Hengli remains a key pickin our universe.
    Loss in Mexico operation to be further narrowed. Mexico plant isengaged in hydraulic components business at the moment. Based onour understanding, the loss in Mexico plant narrowed to RMB20mn in2Q26 from RMB60mn in 1Q26. We understand that the annualdepreciation expense is ~RMB100mn while the annual operatingexpense is ~RMB40-50mn. Looking forward, we now assume onlyRMB20m loss in 2H26E. We forecast the full-year loss to be~RMB100mn.
    Ball screws for humanoid robots. Two production lines in China arein operation at present. Hengli expects higher output in 4Q26E, whilethe growth in 1Q27E will depend on the production schedule of themajor US humanoid robots manufacturer. Hengli’s ball screw capacityis expected to reach 100k units in the near term, and is planned toincrease to 1mn units in 3-5 years.
    Precision industry segment (excluding ball screw) to potentiallyturn profitable in 2027E. The downstream applications includesemiconductor and machine tools. For machine tools, Hengli will focusmore on high-end customers (higher margin). For semiconductor,Hengli will focus on import substitution. In terms of capacity, the annualproduction value is expected to reach RMB2bn. We expect the segmentrevenue to double and turn profitable in 2027E.

Net profit -3% YoY in 2Q26 but largely due to FX loss; strong revenue growth and EBIT

恒立液压(601100)
    Hengli’s net profit was flat YoY at RMB1.4bn in 1H26. This implies 2Q26 netprofit of RMB784mn (slightly down 3% YoY), which is in line with ourexpectation. The lack of earnings growth in 2Q26, despite strong growth ofrevenue/EBIT of 32%/22% YoY, was largely due to FX loss (RMB appreciation).We maintain our positive stance on Hengli with unchanged TP of RMB125(based on 48x 2026E P/E, 1.5SD above the historical average to reflect boththe upcycle of hydraulic business and the huge growth potential of precisionbusiness). Hengli remains a key pick in our universe. Maintain BUY.
    Key highlights in 2Q26 results: Revenue in 2Q26 grew 32% YoY toRMB3.6bn. Blended gross margin contracted 4.1ppts YoY (due to highbase) but expanded 1.3ppts QoQ to 39.9%. EBIT grew 22% YoY, as R&Dexpenses dropped 15% YoY which offset the increase in S&D expenses.Net profit was down 3% YoY at RMB784mn, as the FX loss was recognized(vs gain in 2Q25). Operating cash inflow increased 30% YoY to RMB736mn.
    Strong growth of hydraulic cylinders for excavators in 1H26 driven byindustry upcycle. Sales volume surged 32% YoY to 408k units. Weestimate that Hengli achieved a market share of 67% in 1H26, based ondomestic sales and exports from China.
    Risk factors: (1) Slowdown of demand for hydraulic components; (2)slower-than-expected new business development.

Early signs of inflection at a cyclical trough

豪威集团(603501)
    OmniVision reported 1H26 revenue of RMB14.0bn, flat YoY, while net profit fell39.9% YoY and GPM declined 1.7ppt YoY to 28.8%, as lower-margin distributionrevenue rose 41% YoY to 23% of total sales. 2Q26 revenue rose 18.7% QoQ toRMB7.61bn, exceeding guidance of RMB7.15-7.54bn and Bloombergconsensus of RMB7.4bn, although GPM remained soft at 28.3%. The 3Q26guidance of RMB7.58-8.13bn revenue and 29.4-30.7% GPM points to modestsequential growth but a clearer margin recovery. We cut 2026E/27E revenue by12%/12% and GPM by 2.1ppt/2.9ppt factoring in the results. Nevertheless, wemaintain BUY as earnings approach a cyclical trough and the mix shifts towardhigher-value applications. We lower our TP to RMB125, based on 33x 2027EP/E (previously 33x 2026E), below its two-year historical forward avg. P/E of36.7x to reflect cyclical weakness.
    Mixed segment performance, but higher-value applications remainedresilient. Consumer-electronics CIS revenue fell 31% YoY and accountedfor 31% of CIS sales, reflecting weak smartphone demand and producttransitions. Auto CIS declined 16% YoY and represented 34% of CIS sales,as inventory adjustments weighed mainly on 1Q26; however, demandrecovered visibly in 2Q26 and should benefit from rising camera content andhigher-resolution ADAS adoption. In contrast, professional-imaging CISgrew 53% YoY to 14% of CIS sales, machine-vision and robotics CISincreased over 70% YoY, medical CIS rose 15% YoY, auto analog expanded67% YoY, and display solutions grew ~13% YoY. This divergence suggestsa structural product-mix transition rather than a broad-based deterioration incompetitiveness, in our view.
    Robotics, auto analog and optical connectivity are emerging as newgrowth engines. Higher-end robotic data-collection systems can carry overUS$100 of image-sensor content, offering meaningful upside despite thebusiness’s small current base. In auto analog, OmniVision is expandingacross MCU, PMIC and SBC products, leveraging its established customerbase to evolve from a sensor vendor into a platform supplier. Opticalconnectivity could offer an even larger opportunity, with mgmt. estimatingthat its product portfolio could provide US$10 or more of semiconductorcontent per optical module, depending on product adoption. We thereforeview optical connectivity as meaningful long-term earnings optionality ratherthan a material near-term contributor.
    OmniVision is entering a gradual recovery. Volume stabilization becamevisible in 2Q26, while margin normalization should begin in 3Q26. Structuralearnings expansion is more likely in 2027, when higher-value businessesshould contribute for a full year. Maintain BUY with TP of RMB125.
    Key risks: Slower-than-expected product R&D, weak demand recovery, etc.

Net profit +77% YoY in 1H26, in line with profit alert

宏桥控股(002379)
    Hongqiao Holdings’ net profit came in at RMB15.6bn (up 77% YoY) in 1H26, inline with the profit alert announced in Jul. The results imply 1.2x YoY growth ofnet profit in 2Q26. The earnings growth in 1H26 was much higher than that ofChina Hongqiao (1378 HK, BUY), as (1) Hongqiao Holdings’ expense growthwas less than that of China Hongqiao, and (2) Hongqiao Holdings does not ownbauxite asset (weak bauxite price in 1H26). We revise up our 2026E/27E/28Eearnings forecasts by 7%/4%/4%, mainly due to lower minority interestassumptions, which offset the lower forecast on alumina profit. Our TP is slightlylowered to RMB28, based on 12x 2026E P/E, equivalent to unchanged 20%premium to our target multiple (10x) for China Hongqiao (previously RMB29, aswe trimmed our target P/E of China Hongqiao).

业绩符合预期；追光不止，下一代光互连蓄势待发

中际旭创(300308)
    中际旭创公布2026年半年报：实现营收人民币417.8亿元，同比增长182.5%；归母净利润136.5亿元，同比增长241.7%；扣非净利润130.9亿元，同比增长229.3%。分季度看，二季度营收为222.8亿元，环比增长14.3%，符合彭博一致预期；归母净利润和扣非净利润分别为79.2亿元（高于彭博一致预期）和73.7亿元，环比分别增长38.1%和29.0%。二季度收入、归母净利润、扣非净利润以及毛利率（46.4%，高于彭博一致预期45.7%）和净利率（35.5%）均创历史新高，主要受益于800G/1.6T等高附加值光模块持续放量、产品结构优化及规模效应进一步释放。我们预计公司收入将在2026/2027年分别同比增长179%/65%，同期毛利率分别达到46.6%/47.7%。维持“买入”评级，目标价上调至人民币1,400元，基于2027年预测市盈率26倍，与同业平均值基本相当。
    高速产品放量推动光模块销量、ASP及盈利能力同步提升。上半年公司光模块销量达到1,899万只，同比增长109.8%；整体ASP约2,178元/只，较去年同期提升36.5%。据披露数据测算，其中海外ASP约2,350元/只，显著高于国内约821元/只，主要反映海外800G/1.6T等高速产品占比更高。受益于产品结构优化及规模效应释放，公司光模块毛利率同比提升6.6个百分点至46.6%，随着1.6T持续爬坡及更多客户进入部署周期，盈利能力仍有提升空间。
    旺盛订单推动产能利用率提升，全球化扩产为后续交付提供保障。上半年公司光模块产能为2,215万只，产量和销量分别达到1,886万只和1,899万只，产能利用率由去年同期的81.0%提升至85.1%。截至6月末，在建工程较年初增长160.7%至37.1亿元，在建工程占固定资产的比例由20.0%升至37.8%，苏州、铜陵、成都及泰国等基地协同扩产。受应收账款、存货及预付款增加影响，上半年经营性现金流净额同比下降44.1%至18.0亿元。
    硅光与相干技术积累支撑下一代产品持续迭代。上半年1.6T硅光模块规模放量，出货量逐季提升，成为收入增长的重要驱动力。公司已形成覆盖400G、800G和1.6T的硅光产品布局，并具备相干器件、激光器及相干光组件的自主研发和量产能力。在此基础上，公司持续投入1.6T、3.2T及更高速率产品，积极布局NPO、XPO、CPO和OCS等下一代光互连方案，为中长期增长提供支撑。
    风险提示：海外AI算力资本开支不及预期；原材料供应紧张；汇率波动等。

Guidance raised on robust CDMO growth

康龙化成(300759)
    Pharmaron delivered robust1H26results,with revenue rising17.9%YoY toRMB7.6bn and non-IFRS net profit up20.3%YoY to RMB909mn.Earningsgrowth in2Q26clearly accelerated over1Q26.1H26revenue accounted for46.2%of our full-year forecast,higher than the historical range of43-45%,whilenon-IFRS net profit in1H26represented42.1%of our full-year forecast,in-linewith the historical range of40-45%.New bookings increased by more than30%YoY,led by the>50%YoY growth of CDMO business.Reflecting strong ordergrowth and improving execution,mgmt.raised full-year revenue growth guidanceto15-20%(from12-18%),coupled with faster growth of non-IFRS net profit.
    Commercial breakthroughs and margin expansion of CDMO segment.CDMO segment was the standout performer,generating1H26revenue ofRMB1.88bn(+32.8%YoY)and a gross profit margin(GPM)of25.7%(+2.6ppt YoY).Growth was fueled by robust small-molecule demand and theprogression of late-stage projects.The company secured a landmarkcommercial drug-product manufacturing agreement for Eli Lilly’s oral GLP-1product(Orforglipron),while its Ningbo facility passed its first Chinainnovative drug API PAI Inspection.Its CDMO services encompass a broadrange of modalities and high-potential targets,with several products alreadyin mid-to-late-stage clinical or commercialization stage,poised for near-termvolume ramp-up.The company is also stepping up capacity expansion,advancing small-molecule CDMO facilities in Shaoxing and Hangzhou,aswell as facilities for peptide and conjugation.Driven by robust demandcoupled with rising utilization,we expect CDMO segment to serve as the maincontributor to the Company’s overall GPM expansion going forward.
    Clinical services close to bottoming-out.Clinical services revenue grew13.8%YoY in1H26,higher than the single-digit growth seen in2024/25.2Q26segment GPM rebounded sharply by~5.0ppts QoQ to12.1%,aspricing pressure eased with signals of price hikes.New orders climbed>30%YoY,creating more evidence of demand recovery in China clinical market.Mgmt.expected continued margin improvement through2H26and into2027.
    Resilient early-stage demand with AI momentum building.Lab servicesrevenue increased13.7%YoY in1H26,with bioscience contributing over60%of segment revenue.Segment bookings rose20%+YoY,underscoringsustained early-stage R&D demand from both MNCs and biotech clients.Specifically,new modalities revenue within bioscience grew over40%YoY,aligning with the trend seen in past few years.Note that AI-driven drugdiscovery(AIDD)revenue now exceeds7%of the lab segment,with AIDDorder growth consistently outpacing the overall lab average.
    Maintain BUY.To factor in the solid demand growth and expected marginexpansion,we raise our forecast on Pharmaron’s earnings,expectingrevenue to grow by18.3%/19.6%/17.0%YoY and non-IFRS net profit toincrease by22.5%/23.2%/20.0%YoY in2026E/27E/28E,respectively.Hence,we raise our DCF-based TP from RMB39.00to RMB56.00(WACC of9.32%;terminal growth of2.0%;both unchanged).
    MORE REPORTS FROM BLOOMBERG:RESP CMBROR http://www.cmbi.com.hk
    Source:Company data,CMBIGM estimates
    Source:Bloomberg,CMBIGM estimates
    Risks:
    1)Lower-than-expectedCDMO projects in the globalin early-stage R&D;3)geopolitical uncertainties.

Robust overseas growth offset soft domestic demand

联影医疗(688271)
    United Imaging (UIH) reported 1H26 revenue of RMB7,052mn, up 17% YoY,representing 42% of our prior full-year forecast and below the ~47% historicalaverage. Overseas revenue remained strong, up 54.5% YoY while domesticrevenue grew a modest 8.5% YoY against a weak domestic market. Attributablenet profit decreased 10% YoY to RMB897mn, primarily due to FX losses. On anex-FX basis, bottom-line grew a resilient 9% YoY. Given weaker-than-expecteddomestic procurement in 1H26 and the lag between tender wins and revenuerecognition, we lower our 2026E revenue forecast by 3.7%. We also cut our2026E earnings forecast by 6.8%, reflecting the FX losses already recorded in1H26 and near-term gross margin pressure from broader domestic centralizedprocurement, although we expect FX headwinds to moderate in 2H26E. Lookingahead, we believe that the sales mix shifts to mid- to high-end products andservices should help offset centralized procurement-related margin pressure inthe long term.
    Overseas growth remained strong, with improving margins. Overseasrevenue increased 54.5% YoY to RMB1,765mn, expanding the overseasrevenue mix by 6ppts to 25% (+6ppts YoY). The robust growth was primarilydriven by APAC (+148.5% YoY) and Europe (+49.4% YoY). Servicerevenue overseas increased 64% YoY, driven by a growing installed base.Notably, favorable mix toward mid- to high-end products, together withimproving localization and operating efficiency, drove overseas grossmargin up by over 3ppts YoY. The order intake remained healthy, with mixcontinuing to shift toward higher-end products. We therefore expectoverseas revenue growth to remain strong in 2H26.
    Domestic share gains led by high-end products. Domestic revenue grew8.5% YoY to RMB5,287mn despite a weak market in 1H26, with UIH gaining1.7ppts of domestic market share YoY. Share gains were particularlynotable in high-end products such as 3.0T MR (+1.5ppts), PET/MR (+40ppts), DSA (+6ppts). In addition, we believe UIH’s increasing revenue mixof mid- and high-end products should help mitigate the margin pressurefrom centralized procurement over time. According to MDDi, the domesticmarket for medical imaging equipment declined 15.8% YoY in 1H26. Giventhe high base in 2H25 and the tender-to-revenue lag, we expect 2H26Edomestic revenue will inevitably face growth pressure. However, therecovery in procurement activities since July should support solid growth inlate-2H26E and 1H27E.
    Maintain BUY. We lower our 2026E earnings forecasts to reflect near-termFX losses and pressure from centralized procurement, but remain positiveon UIH’s long-term growth. We therefore lower TP to RMB154.95 based ona 9-year DCF model (WACC: 8.1%, terminal growth: 4.0%).

Robust Q2 earnings; AI-driven mix upgrade and ASP hikes in full swing

生益科技(600183)
    Shengyi Tech(SYT)reported strong1H26results,with revenue increasing50%YoY to RMB19.0bn and net profit surging130%YoY to RMB3.3bn.In2Q26,revenue rose54%YoY/34%QoQ to RMB10.9bn,slightly below Bloombergconsensus of RMB11.2bn.Net profit reached RMB2.13bn,up147%YoY/84%QoQ and well above consensus of RMB1.7bn.GPM expanded to32.6%from28.1%in1Q26,beating the30.4%consensus estimate.The results reinforce ourview that SYT remains a key beneficiary of the AI infrastructure upcycle.ReiterateBUY and raise our TP to RMB190,based on40x2027E P/E(previouslyRMB90based on35x2026E P/E),approximately2-SD above its1-yrhistorical mean.We forecast revenue and earnings CAGRs of47%and68%over2025-28E,implying a PEG of0.58x.We lift revenue forecasts by16%/39%and net profit forecasts by15%/31%in FY26/27E,respectively,reflecting strongAI-CCL/PCB demand and higher margin assumptions driven by ASP increasesand a richer high-end product mix.
    Core segments:Broad-based AI-driven growth across CCL&PCB.CCL&prepreg sales volumes increased14.2%/12.4%YoY,respectively in1H26,while segment revenue rose47.7%to RMB12.4bn,reflecting priceadjustments and a richer AI product mix.Subsidiary Shengyi Electronics(688183CH,NR)recorded revenue of RMB5.8bn,up53.5%YoY,and netprofit of RMB1.1bn,up109%YoY.PCB shipments increased23.1%YoY,with sales growth outpacing volume as high-layer-count and HDI productscontinued to ramp up.SYT’s strength across CCL and PCB gives it broadexposure to the AI infra.value chain.We forecast revenue growth of62%/51%in FY26/27E driven by expansion of high-end CCL products.
    Margins:ASP increases and mix upgrades drove another step-up.GPMexpanded by4.8ppt YoY to30.7%in1H26.CCL&prepreg GPM increasedby5.5ppt to29.2%,while PCB GPM rose by3.4ppt to31.2%.Strongerpricing and premium AI products drove profit growth ahead of sales.SYTrecorded RMB410mn of fair-value gains,mainly related to Novoray’s(688300CH,NR)convertible bonds,while adj.net profit neverthelessincreased111%YoY.We forecast GPM of30.6%/31.7%in FY26/27E.
    Capacity expansion supports medium-term growth.Jiangxi Phase IIreached full production in1H26,adding annual capacity of18mn sqm of CCLand34mn meters of prepreg.Thailand plant is expected to begin trialproduction in2H,while the two-phase Songshan Lake project is planned toadd48mn sqm of CCL and100mn meters of prepreg.Capex reachedRMB1.88bn in1H26.Ramp-up execution and the availability of criticalupstream materials remain key variables for earnings delivery beyond2026.
    Reiterate BUY with TP raised to RMB190,based on40x FY27E P/E,approx.2-SD above SYT’s one-year historical mean.We believe themultiple is justified by accelerating earnings,structural mix upgrades andexposure to tight AI-related CCL and PCB capacity.Key risks include slowercapacity ramp-up,raw-material costs,intensifying competition,etc.