How did third-quarter profit perform?

  • Net profit in the third quarter of 2026 was 1.687 billion yuan, down 6% year on year and up 20% quarter on quarter, in line with investor expectations; revenue was 45.5 billion yuan, down 2% year on year and up 4% quarter on quarter.
  • Gross margin was 12.7%, up 0.2 percentage points year on year and 1 percentage point quarter on quarter. Citi said an improved revenue mix provided support, although part of the benefit was offset by downstream price cuts, rising raw material costs and chip shortages.

Which businesses are growing, and which remain under pressure?

  • In the first three quarters of 2026, automotive electronics revenue rose 19% year on year, primarily driven by increased orders for new-energy vehicle motor components; over the same period, revenue from interior and exterior trim, metal-formed components and functional components fell 2.3%, 4.4% and 6.8%, respectively.
  • Investment income from joint ventures fell to 1.55 billion yuan over the same period, down 17% year on year, a decrease of approximately 305 million yuan; investment income related to functional components and automotive electronics fell by 203 million yuan and 84 million yuan, respectively. Joint ventures are an important source of the company’s profit, and the decline offset some of the operating improvement.

How does Citi view future earnings and valuation?

  • Management expects the overall domestic automobile market to remain under pressure in the fourth quarter of 2026. After slightly raising its gross margin assumptions and lowering its operating expense assumptions, Citi kept its net profit forecasts for 2026–2028 broadly unchanged at 6.556 billion yuan, 7.477 billion yuan and 8.05 billion yuan, respectively.
  • Citi is positive on the new-energy vehicle and automotive electronics businesses and the support for growth from expanding its local-brand customer base; however, sales volumes in China and at SAIC Motor’s passenger vehicle business, the ability to pass raw material costs on to automakers, and joint venture growth will all affect this assessment.
  • Citi maintained its Buy rating and 25 yuan target price, based on 12 times forecast 2026 earnings; at the share price stated in the report, the forecast price-to-earnings ratio was 7.5 times and the expected dividend yield was 5.8%.