Key takeaway

The company's revenue and net profit attributable to shareholders of the parent company increased by 29.7% and 45.2% YoY, respectively, in 1H26. Power supply product revenue reached RMB1.841bn, up 60.9% YoY. Customized power supplies for data centers and servers entered the continuous delivery stage and became the key incremental earnings driver. Profitability remained affected by tight supplies of certain upstream raw materials and foreign exchange losses. Gross margin was 20.9% in 2Q26, down 0.3 pcts YoY and 0.7 pcts QoQ. Operating costs grew slightly faster than revenue, weighing on net profit excluding non-recurring gains and losses. Net foreign exchange losses and fees decreased from approximately RMB64mn in 1Q26 to approximately RMB27mn in 2Q26. Ending inventory was RMB3.587bn, up 29.3% from the beginning of the year, reflecting production stockpiling amid order growth. Overseas revenue increased by 45.5% YoY, with gross margin 7.3 pcts higher than in the domestic market. Going forward, key areas to monitor include Vera Rubin shipments and the ramp-up of the company's high-power supply products as AIDC power distribution transitions toward 800VDC.

Event

The company released its 1H26 results, reporting revenue, net profit attributable to shareholders of the parent company, and net profit excluding non-recurring gains and losses of RMB6.061bn, RMB252mn, and RMB118mn, respectively, up 29.7%, 45.2%, and down 16.1% YoY. In 2Q26, revenue, net profit attributable to shareholders of the parent company, and net profit excluding non-recurring gains and losses reached RMB3.273bn, RMB137mn, and RMB78mn, respectively, up 38.9%, 107.1%, and 59.2% YoY, and up 17.4%, 19.8%, and 93.7% QoQ.

Quick Take

Rapid growth in power supply products as AIDC deliveries enter the realization stage

Power supply product revenue reached RMB1.841bn in 1H26, up 60.9% YoY and accounting for 30.4% of total revenue. Gross margin was 25.1%, up 2.6 pcts YoY, making it the fastest-growing major business. The company disclosed that its customized power supply projects for data centers and servers gradually moved from R&D to delivery beginning in 2H25, driving revenue growth in 1H26. Meanwhile, the company continued to expand its industrial power supplies, energy storage and charging products, and medical power supplies. The power supply business is expected to become an important source of revenue growth.

Multiple businesses grow, but cost pressures persist as foreign exchange headwinds ease from 1Q26

Revenue from smart living, new energy transportation, industrial automation, intelligent equipment, and precision magnetic components increased by 20.2%, 10.7%, 15.9%, 17.6%, and 47.8% YoY, respectively. Gross margin for smart living was 18.4%, down 4.3 pcts YoY, placing some pressure on overa ll profitability. The overall gross margin was 21.2% in 1H26, down 0.9 pct YoY. The company attributed this to tight supplies of certain upstream raw materials and faster cost growth than revenue growth. Financial expense was RMB94mn during the period, compared with RMB-3mn in the same period last year, mainly due to foreign exchange losses. Net foreign exchange losses and fees decreased to approximately RMB27mn in 2Q26 from approximately RMB64mn in 1Q26.

Overseas business continues to expand, with profitability retaining its edge

Overseas sales revenue reached RMB2.180bn in 1H26, up 45.5% YoY and accounting for 36.0% of total sales revenue. The overseas gross margin was 25.9%, 7.3 pcts higher than the domestic gross margin. Direct and indirect overseas revenue accounted for approximately 43% of total revenue. Customer acquisition and supply capabilities in overseas markets are important components of the company’s long-term competitiveness. Ending inventory was RMB3.587bn, up 29.3% from the beginning of the year, mainly because the company expanded production and inventory preparation in response to increased orders. Contract liabilities were RMB112mn, up 20.6% from the beginning of the year.

AIDC products and customer acquisition continue to advance, with a focus on delivery ramp-up and product expansion

The company disclosed that it has achieved continuous volume deliveries of AIDC power supplies since 1Q26. As one of Nvidia’s recommended data center power supply vendors, it is participating in the development of power systems and high-voltage direct-current power supply solutions for Blackwell, Vera Rubin, and nextgeneration architectures. It is also advancing customized projects with several North American cloud service providers. On the product side, the company has established a full-chain solution covering grid connection through GPU endpoints. Its Sidecar supports 800VDC and power delivery of more than 1MW per rack. Its SST remains under development. Key areas to monitor include the delivery pace of North American projects and the increasing revenue contribution from AI power supplies.

Investment recommendation & earnings forecast:

Net profit attributable to shareholders of the parent company is expected to reach RMB820mn, RMB1.81bn, and RMB2.69bn in 2026, 2027, and 2028, respectively, corresponding to P/E ratios of 88x, 40x, and 27x. AIDC power supply deliveries already supported earnings in 1H26. In 2H26 and beyond, growth is expected to come from the ramp-up of Vera Rubin and higher volumes of high-power data center products driven by the gradual adoption of 800VDC power supply systems.

Risks

1) Demand: Capital expenditure by leading overseas AI companies may fall short of expectations.

2) Supply: Tight supplies and rising prices of electronic components, PCBs, and power devices.

3) Policy: Data center construction in overseas and domestic markets may no longer receive policy support and may face local opposition and other obstacles.

4) International situation: Intensified international trade barriers, export restrictions; increased costs due to heightened requirements for local production; disruptions in overseas transportation and increased freight costs due to international conflicts.

5) Market: Intensifying competition may cause the gross margin and profitability of power supply products to fall short of expectations.

6) Technology: Obstacles in new product R&D or product homogenization may weaken competitiveness.