Key takeaway

In 1H 26, the company’s revenue of RMB7.646bn maintained steady growth, with strong performance from overseas operations, oil and gas engineering, and technical services; profit was affected by delays to Middle East projects, foreign exchange losses, and the disposal of Guangming Energy, and therefore declined, but the long-term growth trend remains intact. The traditional oil and gas business remained resilient, with new orders reaching RMB10.046bn in 1H26, while oil and gas equipment and natural gas projects continued to advance; the power and data center businesses achieved breakthroughs, securing cumulative orders for gas turbines and ancillary equipment of more than USD3.1bn from November 2025 through the report disclosure date. In the future, the company will expand beyond standalone power supply equipment into AIDC design, power supply and distribution, liquid cooling, modular construction, and intelligent control, providing strong long-term growth momentum.

Event

The company released its 1H26 report. In 1H26, the company recorded operating revenue of RMB7.646bn, up 10.81% YoY; net profit attributable to shareholders of the parent company was RMB1.196bn, down 3.65% YoY. In 2Q26, the company recorded operating revenue of RMB4.356bn, up 3.4% YoY; net profit attributable to shareholders of the parent company was RMB608mn, down 21.6% YoY.

Quick Take

Revenue maintains steady growth as the share of overseas revenue continues to rise

In 1H26, the company recorded operating revenue of RMB7.646bn, up 10.81% YoY. By segment, high-end equipment manufacturing generated revenue of RMB4.189bn, down 0.83% YoY; oil and gas engineering and technical services generated revenue of RMB2.488bn, up 20.22% YoY; new energy and resource recycling generated revenue of RMB533mn, up 62.26% YoY; and oil and gas field development generated revenue of RMB300mn, up 31.34% YoY.

By region, domestic revenue was RMB3.794bn, up 5.24% YoY; overseas revenue was RMB3.852bn, up 16.90% YoY.

The share of overseas revenue increased by 2.63 pcts to 50.38%, with overseas markets remaining an important source of revenue growth.

Short-term factors, including foreign exchange losses and project delays, weigh on 2Q26 profit

In 1H26, the company’s overall gross margin was 30.97%, down 1.22 pcts YoY. The selling expense, administrative expense, R&D expense, and financing expense ratios were 4.23%, 3.78%, 2.87%, and 2.73%, respectively, changing by -0.04 pcts, +0.01 pcts, -0.66 pcts, and +4.91 pcts YoY. The change in the financing expense ratio was mainly due to increased foreign exchange losses. Net cash flow from operating activities turned negative at RMB748mn, mainly because the company received substantial advance payments for engineering projects in the same period last year, while cash payments for goods purchased and services received increased YoY in the current period. The company's net profit attributable to shareholders of the parent company declined by 21.6% YoY in 2Q, mainly due to three factors: first, geopolitical conflicts in the Middle East disrupted logistics, delaying the delivery of some oil and gas engineering projects and increasing costs; second, fluctuations in the USD exchange rate resulted in an exchange loss of RMB264mn, compared with an exchange gain of RMB81mn in the same period last year; third, the company sold Guangming Energy at the end of 2025, which had generated net profit of RMB143mn in 1H25, resulting in lower oil and gas technical service revenue and profit in the current period.

Backlog grows steadily, while the traditional oil and gas business remains resilient

In 1H26, the company secured new orders worth RMB10.046bn, up 1.67% YoY. As of the end of June 2026, its backlog stood at RMB13.995bn, up 13.00% YoY, supporting subsequent revenue recognition. In oil and gas equipment, the company launched a new-generation intelligent electric-drive well-logging semi-trailer and successfully delivered it to North America. It also introduced an intelligent electric-drive fracturing truck for all operating conditions, electric-drive cementing equipment for all operating conditions, and the Streamline series of fluid ends. In the natural gas sector, the company supplied pressure-regulating stations and front-end modular equipment for domestic gas turbine projects, a project in Uzbekistan, and an H-class heavy-duty gas turbine project in Saudi Arabia. In June 2026, the company signed a five-year contract worth approximately RMB395mn with Kuwait National Petroleum Company for oil-based drill cuttings treatment services. Oil and gas technical services, capacity expansion, customer development, and order intake in the Middle East were not materially affected. Production and operations in the region remained generally stable.

Rapidly growing gas turbine orders gradually enter the delivery phase, while the integrated AIDC rollout accelerates

The company's independently developed integrated microgrid solution has completed reliability validation under all operating conditions. It has also secured its first orders for data center microgrid design and procurement, extending its business scope from gas turbine generator sets to integrated power supply and distribution solutions. From November 2025 through the disclosure date of this report, the company secured multiple orders for gas turbine generator sets and ancillary equipment, with a cumulative value exceeding USD3.1bn, equivalent to approximately RMB20.9bn. In July 2026, the company's controlled subsidiary J&F Power Systems signed a USD1.465bn contract with a renowned international cloud service provider to supply gas turbine generator sets. As the relevant orders have long fulfillment cycles, most deliveries are scheduled for 2027 and beyond. They had not yet entered the delivery phase in 1H26 and made relatively limited contributions to revenue and profit for the period. As these orders gradually enter the execution and delivery stages, the power and data center businesses are expected to become key drivers of the company's medium- to long-term growth.

Investment recommendation: The company's core conventional oil and gas business remains stable, while it continues to expand in overseas markets. It has achieved a major breakthrough in gas turbine orders and is accelerating its expansion into integrated AIDC areas such as power supply and distribution, liquid cooling, modular construction, and intelligent control. Short-term exchange rate fluctuations, delayed delivery of Middle East projects, and the disposal of Guangming Energy have disrupted profit, but do not change the company's long-term growth trajectory. The company is expected to achieve operating revenue of RMB20.863bn, RMB37.138bn, and RMB48.151bn in 2026-2028, representing YoY growth of 28.60%, 78.01%, and 29.65%, respectively; net profit attributable to shareholders of the parent company is expected to reach RMB3.475bn, RMB7.519bn, and RMB11.080bn, representing YoY growth of 29.65%, 116.35%, and 47.36%, respectively, corresponding to PE multiples of 44.48x, 20.56x, and 13.95x, respectively. A “buy” rating is assigned.

Risks

(1) Gas turbine and AIDC order deliveries falling short of expectations: The company has a large volume of orders for gas turbines and ancillary equipment, with some projects scheduled for delivery in 2027 and beyond. If the supply of core components, overseas capacity expansion, product certification, or project execution fal ls short of expectations, the realization of revenue and profit from the relevant businesses may be affected.

(2) Expansion of the integrated AIDC business falling short of expectations: The company is expanding from gas turbine power supply equipment into areas such as power supply and distribution, liquid cooling, modular construction, and intelligent control. If progress in UL certification, product validation, customer onboarding, or securing integrated orders falls short of expectations, the growth of new businesses and the upgrading of the business mix may be affected.

(3) Risks from geopolitical conflicts and exchange rate fluctuations: The company derives a high proportion of its revenue from overseas markets. Geopolitical conflicts in the Middle East may disrupt logistics and transportation, delay projects, and increase costs. Significant exchange rate fluctuations may also result in foreign exchange gains or losses and affect the company's operating performance in certain periods.