Key takeaway

The company's core automotive bearing business is solidly managed, with profitability remaining resilient through industry cycles, establishing a stable foundation and cash flow source. At the same time, the company is actively building a second growth curve. Robot components (harmonic reducers) have commenced production, and through the acquisition of Yinqiu Technology, it has further entered the precision bearing sector. On the globalization front, it has completed Thailand Phase III and set up a plant in the US, with a clear strategic direction. We believe the company is in a strategic positioning phase where the core business contributes stable cash flow while new businesses are poised for growth.

Event

The company released its 2025 annual report and 1Q26 report. In 2025, revenue reached RMB788mn, up 1.79% YoY; net profit attributable to shareholders of the parent company was RMB173mn, down 9.17% YoY; recurring net profit was RMB165mn, down 8.49% YoY. In 1Q26, revenue reached RMB213mn, up 8.72% YoY; net profit attributable to shareholders of the parent company was RMB39mn, down 15.55% YoY; recurring net profit was RMB38mn, down 12.65% YoY. Results were broadly in line with expectations.

Quick Take

Core business growing steadily with solid profit base; exchange losses weigh on profit. ① On the revenue side, drivetrain bearings grew relatively fast. Full-year 2025 revenue by product: braking system bearings revenue was RMB620mn (+1.49%), drivetrain system bearings revenue was RMB102mn (+11.93%), and powertrain system bearings revenue was RMB48mn (-6.7%).

By region, overseas revenue was RMB557mn (+5.24%), accounting for 70.7%; domestic revenue was RMB231mn (-5.67%). ② On the profit side, gross margin remained above 30%, while the decline in net margin was mainly dragged by exchange losses. Gross margin was 32.68% in 2025 (+0.16pct YoY) and 31.32% in 1Q26; net margin was 21.9% in 2025 (-2.64pcts YoY) and 18.44% in 1Q26. Excluding the exchange impact, earnings quality was relatively high. ③ On the expense side, fluctuations in full-year 2025 and 1Q26 were mainly due to the impact of financing expense. Full-year 2025 financing expense was RMB-24.82mn, an increase of RMB24.39mn from RMB-49.21mn in 2024, mainly due to exchange losses (a loss of RMB7.406mn in 2025 versus a gain of RMB12.347mn in 2024). In 1Q26, financing expense was RMB8.11mn (compared to -RMB5.9mn in the same period last year).

Continuously advancing capacity upgrades and optimization, with a globalized business presence in Thailand and the United States. ① Xinchang intelligent manufacturing project: The fundraising project for an annual output of 6.29 million sets of high-end automotive bearings is progressing steadily and is expected to reach full production by September 2026. ② Thailand factory: Has obtained the Certificate of Origin recognized by U.S. Customs (E-Ruling certification letter) and completed the third phase of investment, primarily serving customers in global markets such as Southeast Asia, Europe, and North America; ③ Detroit, USA factory: Infrastructure construction has been completed, and production will be advanced subsequently based on customer demand.

New business deployment is accelerating, with robot components already in production. ① The intelligent technological transformation project for robot components, which the company has been investing in since 2024, has now achieved the production of harmonic reducers and specialized bearings for reducers, while actuator modules have completed R&D reserves. ② Steadily advancing the construction of the robot component intelligent transformation project at the Thailand factory represents a strategic adjustment the company has made to actively adapt to changing customer demands in international markets and seize regional supply chain opportunities, leveraging the capacity advantages of the Thailand base to achieve large-scale production and global delivery. ③ Through the strategic investment in Yinqiu Technology, the company can draw on its mature technology and R&D experience in the precision bearing field to further strengthen its technical capabilities in core robot components and enhance product performance, which is expected to accelerate expansion into the core supply chain of the robotics industry and promote in-depth cooperation in key areas such as precision bearings for humanoid robots.

Investment recommendation: We estimate the company's operating revenue for 2026-2028 to be approximately RMB848mn/913mn/984mn, with net profit attributable to shareholders of the parent company of approximately RMB180mn/200mn/218mn, corresponding to PE multiples of approximately 240x/217x/198x. Considering the potential earnings elasticity from the company's deployment in the humanoid robot sector, we maintain an "Overweight" rating.

Sensitivity analysis: Under an optimistic scenario, with rapid revenue growth, we estimate the company's 2026-2028 operating revenue to be approximately RMB860mn/940mn/1,027mn, with net profit attributable to shareholders of the parent company of approximately RMB194mn/218mn/241mn, corresponding to PE multiples of approximately 223x/199x/180x. Under a conservative scenario, with slower revenue growth, we estimate the company's 2026-2028 operating revenue to be approximately RMB842mn/900mn/963mn, with net profit attributable to shareholders of the parent company of approximately RMB172mn/190mn/206mn, corresponding to PE multiples of approximately 252x/228x/210x.

Risks: risks of macroeconomic and automotive industry cyclical fluctuations, export sales falling short of expectations, exchange rate fluctuations, and the development of new customers and industrialization of new projects failing to meet expectations.