Key takeaway

China's overall projector market remained under pressure in 1H26, and the company's domestic business was weak. However, net profit attributable to shareholders of the parent company returned to YoY growth in 2Q26, while the improvement in profit margin exceeded expectations. As China's leading projector manufacturer, the company has deep technological expertise and continues to launch upgraded products. Its overseas business has become its core growth engine, while the rapidly rising share of high-margin overseas revenue has effectively offset pressure in the domestic market. Looking ahead to 2H26, overseas channel expansion is expected to maintain strong momentum. A recovery in China will depend on the peak consumption season, while market competition and expenses related to overseas expansion will continue to exert pressure. Over the medium to long term, the company has strong technological and brand barriers, with a clear path to global growth.

Event

On August 28, 2026, XGIMI released its 1H26 report.

In 1H26, the company recorded revenue of RMB1.606bn, down 1.22% YoY. Net profit attributable to shareholders of the parent company was RMB83mn, down 6.18% YoY, while net margin was 5.18%, down 0.27 pct YoY. In 2Q26, the company recorded revenue of RMB813mn, down 0.30% YoY. Net profit attributable to shareholders of the parent company was RMB33mn, up 26.49% YoY, while net margin was 4.05%, up 0.86 pct YoY.

Quick Take

I. Revenue analysis: Domestic demand under pressure, with explosive growth in overseas business

I. By product: Projector hardware remains the core business, while internet value-added services grow steadily

1) Projectors and accessories: Revenue reached RMB1.503bn in 1H26, up 1.12% YoY, accounting for 93.61% of total revenue. Gross margin was 37.08%, up 5.56 pcts YoY. In the home-use segment, the company launched new products including the X50 Ultra, RS30, AURA 3 laser TV, and MIRA 4K. The X50 Ultra features the company's proprietary DynaEye continuously variable biomimetic aperture, further strengthening the competitiveness of its flagship products. In the commercial display segment, the company officially unveiled a strategy to equip its entire product portfolio with three-color laser technology, covering products with brightness ranging from 5,000 to 60,000 lumens. It also launched its first mass-produced commercial three-color laser project, the “Huashan” series, with brightness ranging from 5,000 to 8,000 lumens. In the automotive segment, the company secured new nominations from two leading Chinese automakers to develop in-vehicle projectors. Competition in China's projector industry remains intense, while the company maintains its leading market share through its brand and technological advantages.

2) Internet value-added services: Revenue reached RMB63mn, up 5.44% YoY, accounting for 3.90% of total revenue. Gross margin was 96.49%, up 0.80 pct YoY. Membership and app distribution businesses grew steadily.

3) Other businesses: Revenue reached RMB40mn, down 49.91% YoY, accounting for 2.48% of total revenue. Gross margin was 27.23%, up 7.75 pcts YoY.

II. By region: Domestic revenue declined, while overseas revenue grew rapidly and its contribution increased significantly

1) Domestic market: Revenue reached RMB818mn, down 28.71% YoY, accounting for 50.94% of total revenue, down 19.64 pcts YoY. Gross margin was 32.90%, up 1.96 pcts YoY. Weak domestic discretionary consumption weighed on the overall projector market, resulting in a temporary decline in the company's domestic revenue.

2) Overseas markets: Revenue reached RMB748mn, up 87.63% YoY, accounting for 46.58% of total revenue, up 22.06 pcts YoY. The revenue contribution increased significantly. Gross margin was 46.63%, up 3.86 pcts YoY. The company has established more than 7,000 offline retail locations overseas, covering Europe, North America, Japan, and Australia. Its online and offline channels are expanding simultaneously, and overseas penetration continues to rise. Strong momentum is expected to continue in 2H26.

II. Profitability analysis: Improved overseas sales mix drove gross margin growth, while expense investment remained high

1) Gross profit: A higher contribution from the high-margin overseas business significantly improved gross margin

Gross margin was 39.16% in 1H26, up 5.87 pcts YoY. Gross margin reached 42.09% in 2Q26, up significantly by 9.53 pcts YoY. The overseas business has a significantly higher gross margin than the domestic business. The increased overseas revenue contribution drove overall gross margin growth and offset pricing pressure in the domestic market.

2) Expenses: Increased investment in R&D and overseas markets drove up expense ratios

The total expense ratio increased by 6.18 pcts YoY in 1H26 and by 9.58 pcts YoY in 2Q26. The selling, administrative, R&D, and finance expense ratios changed by +7.28 pcts, -0.98 pct, +1.15 pcts, and +2.14 pcts YoY, respectively. This was mainly due to: 1) increased spending on overseas brand marketing and channel expansion; 2) continued R&D investment in optical hardware and AI-related technology upgrades; and 3) higher foreign exchange losses caused by exchange rate fluctuations.

3) Net profit: Profit improved significantly in 2Q26, demonstrating earnings resilience

Net margin was 5.18% in 1H26, down 0.27 pct YoY. Net margin reached 4.05% in 2Q26, up 0.86 pct YoY, with the improvement exceeding expectations. Looking ahead to 2H26, overseas revenue is expected to maintain rapid growth, while a recovery in domestic consumption remains pending. However, selling and R&D investment related to overseas expansion will remain high.

Investment recommendation: The company continues to advance its underlying optical technologies and enhance its new product portfolio. Its globalization strategy is taking effect, with rapid overseas growth offsetting pressure in China and reinforcing its solid competitive moat as an industry leader. We forecast net profit attributable to shareholders of the parent company of RMB237mn/RMB383mn/RMB553mn in 2026-2028, corresponding to EPS of RMB3.38/RMB5.47/RMB7.89. The current share price implies PE multiples of 24.63x/15.22x/10.56x. We maintain our “Buy” rating.

Risks

1) Overseas expansion may fall short of expectations: Overseas markets have become a key focus for many projector brands. Brands from Japan, South Korea, and Taiwan, China have taken the lead in global expansion and established a more balanced regional presence. As pioneers in smart projectors, Chinese brands will inevitably accelerate their overseas expansion, but overseas operations involve considerable uncertainty and risk.

2) Intensifying market competition: New brands are entering the projector market. New entrants include international brands such as Samsung and Sharp, home appliance and consumer electronics brands such as MAO KING, Vidda, KKTV, and Coocaa, as well as numerous lesser-known brands.

3) New product sales may fall short of expectations: The development of underlying technologies entails high costs, long cycles, considerable difficulty, and substantial risk. If sales of XGIMI’s LCD products fall short of expectations and its product portfolio expands slowly, the company may miss opportunities for rapid growth.