Key takeaway

Benefiting from the strong boom in the shipbuilding and offshore industry, the company’s diesel engine business achieved rapid growth in 2025. Revenue of its holding subsidiary CSSC Diesel Engine increased 26% YoY, and net margin improved by 2.91pct. In 2025, the company’s marine diesel engine orders increased 23.23% YoY, and deliveries of medium and lowspeed engines are planned to grow by more than 15% in 2026. During the upward cycle of the shipbuilding industry, the company, as the global leader in low speed engines, currently holds abundant diesel engine orders on hand and continues to see improving profitability in newly signed orders. Diesel engine business profit is expected to maintain high growth. In 4Q25, some non diesel segments were affected by intensified market competition, rising raw material prices, and increased provisions, leading to a decline in profitability. In addition, newly signed gas turbine supply orders increased 40.7% YoY in 2025. The company’s self developed CGT25 series units have internationally advanced capabilities. With strong demand driven by the AIDC development wave, the gas turbine business is expected to contribute incremental growth.

Event

The company released its 2025 annual report and the 1Q26 report.

In 2025, the company recorded operating revenue of RMB57.80bn, up 11.81% YoY, and net profit attributable to shareholders of the parent company of RMB1.301bn, down 6.47% YoY. Among them, 4Q25 revenue was RMB16.829bn, up 11.62% YoY, and net profit attributable to shareholders of the parent company was RMB93mn, down 85.60% YoY.

In 1Q26, the company recorded operating revenue of RMB12.86bn, up 4.45% YoY, and net profit attributable to shareholders of the parent company of RMB588mn, up 48.64% YoY.

Quick Take

1Q results significantly exceeded expectations, while non diesel businesses in Q4 weighed on performance

In 2025, the company recorded operating revenue of RMB57.80bn, up11.81% YoY; net profit attributable to shareholders of the parent company was RMB1.301bn, down 6.47% YoY. Benefiting from the continued prosperity of the shipbuilding and offshore business, the company’s diesel engine segment maintained rapid growth. Revenue of its holding subsidiary CSSC Diesel Engine increased 26%. However, revenue from other application industries (such as wind power gearboxes and automotive batteries) declined due to intensified market competition. Meanwhile, raw material prices such as silver, lead, and petrochemical products rose YoY. The cost pressure of related products was not fully passed through, resulting in a decline in profitability. In addition, the company accrued RMB321mn in bad debt provisions and RMB178mn in inventory impairment provisions in 2H25, affecting Q4 profit performance. As raw material cost pass-through progresses, lowefficiency businesses are adjusted, and inventory and receivable risks are gradually cleared, such provisioning pressure is expected to improve marginally in 2026.

In 1Q26, the company’s operating revenue and net profit attributable to shareholders of the parent company increased by 4.45% and 48.64% YoY, respectively. The company’s diesel engine business maintained rapid growth. Sales of its main product, marine low-speed engines, increased and gross margin improved, expanding profit space. Overall performance exceeded our expectations.

Diesel power profitability is on an upward trend: New marine engine orders hit another record high

CSSC Diesel Engine net profit margin increased by 2.91pct, and profitability remains on an upward trend. CSSC Diesel Engine, the operating entity for marine engines, recorded operating revenue of RMB30.158bn in 2025, up 25.98% YoY. Net profit attributable to shareholders of the parent company reached RMB3.438bn, up 69.15% YoY. Net profit margin increased by 2.91pct YoY, and profitability continued to improve, mainly due to higher delivery order prices, improved gross margin, and increasingly evident scale effects. The shipbuilding industry is in a decade-long upward supercycle. Supply and demand for marine engines remain tight, while the share of dual-fuel and low-carbon/zero-carbon main engines continues to rise. As the global leader in lowspeed engines, CSICPCL has abundant orders on hand and is expected to fully benefit from industry trends and achieve sustained margin expansion.

New marine engine orders reached another record high despite market headwinds: Delivery of mediumand low-speed engines is planned to grow by more than 15% in 2026. In 2025, affected by the Section 301 investigation and global trade conflicts, global new shipbuilding orders declined by 24%. However, orders for the company’s marine diesel engines grew against the trend, reaching 14.69mn horsepower for the year, up 23.23% YoY. Among them, low-speed engine orders increased by more than 27% YoY, while new products such as dualfuel and medium-speed engines also achieved breakthroughs. In 2025, the company completed 13.55mn horsepower of marine diesel engines, including more than 11mn horsepower of low-speed engines delivered, reaching another historical high. In 2026, the company plans for deliveries of medium- and low-speed engines to grow by more than 15%, and profits of CSSC Diesel Engine are expected to maintain strong growth.

The marine diesel engine aftermarket has broad potential, and the company ’s service business is expected to develop well. The company’s service business revenue exceeded RMB2bn in 2025, up more than 30% YoY and reaching another record high. With the rollout of the CSGS brand for CSSC Global Service and the digitalintelligence information platform, the service model is shifting from traditional after-sales support to a “onestop” solution service provider, and the aftermarket business is expected to improve the stability and sustainability of the profit structure.

Gas turbine new orders surged, strong position in the small and medium-sized gas turbine market

Gas turbine orders are abundant, with new gas turbine supply orders in 2025 increasing by 40.7% YoY. The gas turbine business is an important growth direction for the company alongside marine diesel engines. The company’s self-developed CGT25 series units have reached internationally advanced standards and hold a leading position in China’s 5–50MW small and medium-sized gas turbine market. In 2025, the company’s gas and steam power segment recorded operating revenue of RMB1.798bn, and new gas turbine supply orders signed during the year increased by 40.7% YoY, indicating strong order backlog; meanwhile, the company has been entrusted to manage Longjiang Guanghan, which is the main producer of gas turbine core engines. As demand for power related to oil and gas, electricity, distributed energy, and AIDC expands, the gas turbine business is expected to become an important incremental driver of the company’s mid- to long-term growth. In addition, the company further strengthened service support for in-operation gas turbines. Newly signed aftersales service orders during the year reached a record high, and the service business is gradually becoming a new growth driver for the gas turbine segment.

Investment recommendation:We expect the company to record operating revenue of RMB65.289bn, RMB72.315bn, and RMB81.709bn in 2026–2028, representing YoY growth of 12.96%, 10.76%, and 12.99%, respectively; net profit attributable to shareholders of the parent company is projected to reach RMB3.010bn, RMB4.207bn, and RMB5.422bn, up 131.40%, 39.75%, and 28.89% YoY, respectively. Based on the current market capitalization, the corresponding PE ratios are 27.00x, 19.32x, and 14.99x. We maintain a “Buy” rating.

Risk: ① Downstream shipbuilding demand fluctuation risk:The global economic slowdown combined with frequent geopolitical conflicts and other disruptions may significantly affect the recovery of the global shipping market. New shipbuilding orders may fluctuate, creating the risk that demand for the company’s diesel engines falls short of expectations. ② Raw material price fluctuation risk:The main raw material for the company’s lead-acid battery products is metallic lead, the main raw material for spherical silver powder is metallic silver, and the main raw material for diesel engines and other equipment is steel, all of which are affected by macroeconomic conditions and changes in supply and demand. ③ Risk of declining profitability in application industries: The company's certain application industry businesses, such as wind power gearboxes and automotive batteries, are affected by intensified market competition in 2025, combined with a YoY increase in raw material prices, and the cost pressure of related products has not been fully passed through, resulting in a decline in profitability; if the operation of the related businesses continues to face pressure, it will affect the company's performance.