Key takeaway

Revenue, net profit attributable to shareholders of the parent company, and adjusted net profit were RMB10.809bn, RMB1.208bn, and RMB1.188bn in 2Q26, up 11.30%, 2.35%, and 30.87% YoY, respectively. The strong growth in adjusted net profit was mainly driven by rapid growth in new energy vehicle exports, which lifted gross profit YoY, with adjusted net profit per vehicle reaching approximately RMB95,400, up 29.42% YoY; non-recurring gains were dragged by investment-related gains/losses, while the high base for non-recurring gains in the same period last year also resulted in relatively low reported growth in net profit attributable to shareholders of the parent company. The company raised its annual DPS to RMB2.5 per share in 2025 and is expected to keep it unchanged in 2026, implying a dividend yield of nearly 9% and attractive absolute returns. In addition, we are optimistic that the full-year export target of 19,000 vehicles, including 5,000 new energy vehicles, will be met or exceeded, and see an opportunity for valuation recovery during the peak season in 4Q26.

Event

The company released its 1H26 report, with revenue of RMB16.719bn, up 3.65% YoY; net profit attributable to shareholders of the parent company of RMB1.867bn, down 3.52% YoY; and adjusted net profit of RMB1.796bn, up 15.83% YoY.

Quick Take

Adjusted net profit grew by over 30% YoY in 2Q26, mainly driven by higher new energy vehicle export volumes. Revenue, net profit attributable to shareholders of the parent company, and adjusted net profit were RMB10.809bn, RMB1.208bn, and RMB1.188bn in 2Q26, up 11.30%, 2.35%, and 30.87% YoY, respectively. Revenue: Higher export volumes offset the decline in domestic sales, while new energy vehicles improved the sales mix. Volume: YTCO sold approximately 12,400 buses in 2Q26, up 1% YoY; exports and domestic sales reached 4,161 and 8,287 vehicles, up 5% and down 1% YoY, respectively; new energy vehicle exports reached approximately 1,236 units, up 55% YoY. Price: Revenue per vehicle was approximately RMB868,300, up 10% YoY, mainly due to a higher share of new energy vehicle exports and an increase in the company’s average selling price. On the one hand, exports accounted for 33% of YTCO’s total sales in 2Q26, while new energy vehicles accounted for 30% of exports, up 1 pct and 10 pcts YoY, respectively. On the other hand, customs data showed that YTCO’s new energy vehicle export ASP increased by over 20% compared with full-year 2025. Profitability: The significant growth in adjusted net profit in 2Q26 was mainly driven by rapid growth in new energy vehicle exports, which lifted gross profit YoY, with adjusted net profit per vehicle reaching approximately RMB95,400, up 29.42% YoY. Non-recurring gains in 2Q26 were dragged by investment-related gains/losses, while the high base for non-recurring gains in the same period last year also resulted in lower reported growth in net profit attributable to shareholders of the parent company than in adjusted net profit.

Profitability continued to improve, while expense control remained prudent. In 2Q, gross margin, net margin, and net margin excluding non-recurring items were 24.97%, 11.30%, and 10.99%, respectively, up 2.03 pcts, down 1.06 pcts, and up 1.64 pcts YoY, and up 1.41 pcts, unchanged, and up 0.71 pcts QoQ, respectively. In 2Q, the period expense ratio, selling expense ratio, administrative expense ratio, R&D expense ratio, and finance expense ratio were 10.22%, 3.48%, 2.05%, 4.35%, and 0.34%, respectively. They increased by 0.43 pcts, 0.54 pcts, decreased by 0.28 pcts and 0.31 pcts, and increased by 0.49 pcts YoY, respectively, while decreasing by 3.13 pcts, 0.39 pcts, 0.92 pcts, 1.73 pcts, and 0.10 pcts QoQ, respectively.

Attractive valuation and dividend yield; we expect solid full-year earnings delivery and valuation rerating. The company has raised its annual DPS to RMB2.5 per share. Its dividend policy has historically been stable, with no dividend cuts during periods of export growth. The DPS is expected to remain unchanged in 2026, supported by earnings growth and ample cash flow. Based on this assumption, the current dividend yield is nearly 9%, offering compelling absolute returns. Based on its order backlog, the company remains confident in achieving its full-year export target of 19,000 vehicles, including 5,000 new energy vehicles. With the 4Q peak season approaching and earnings growth expected to materialize, we see further potential for a valuation rerating.

Risks:

1. Worse-than-expected industry outlook. Buses are customized industrial products manufactured at scale. End-market demand from tourism, intercity passenger transportation, and public transit is cyclical. If unexpected factors such as travel restrictions or policy constraints weigh on demand, industry conditions may fall short of expectations.

2. Slower-than-expected overseas customer acquisition. Regional segments of the overseas bus market are relatively fragmented. If export destinations impose additional tariffs or other trade barriers, the company may face higher ancillary costs or restricted market access. As a result, overseas customer acquisition may fall short of expectations.

3. Significant fluctuations in raw material purchase prices and the RMB exchange rate. Direct materials, mainly components, account for a high proportion of the company’s costs. Significant fluctuations in raw material prices may put short-term pressure on costs. In addition, a sharp appreciation of the RMB may negatively affect the short-term profitability of the company’s export business.

4. Intensifying industry competition. Domestic bus manufacturers are accelerating their expansion into export markets, while overseas competitors such as Mercedes-Benz are stepping up the development of new energy buses. Intensifying industry competition may lead to a decline in the company's market share.