Chipown: AI power-supply chips open up room for growth, but costs still constrain profit recovery

Why did profit halve despite continued revenue growth?

Chipown reported revenue of 1.01 billion yuan in the first three quarters of 2026, up 14.69% year on year; net profit, however, fell 51.61% to 86 million yuan, and gross margin declined 2.86 percentage points year on year to 34.35%. Revenue expansion has yet to translate into improved earnings.
Pressure came from both investments and operations: listed equity holdings generated a non-cash fair-value loss of 52.97 million yuan; asset impairment losses in the first three quarters totaled 64.53 million yuan, mainly involving inventories. Over the same period, the expense ratio rose to 30.57%, up 2.17 percentage points year on year, as expansion of sales and administrative staff and spending on marketing and equity incentives increased expenses.

By 2025, the company had completed its product portfolio covering the three stages of power conversion in computing servers; in 2026, more than ten core products related to AI computing entered mass production. The business is moving from product portfolio development to volume production.
In the third quarter of 2026, combined revenue from emerging areas including servers, communications, industrial motors, photovoltaics, energy storage and charging, and new-energy vehicles grew by more than 70% year on year. That aggregate performance included both a ramp-up in industrial customer projects and the introduction of AI server products.
Nomura expects industrial power-supply chip revenue to rise from 276 million yuan in 2026 to 564 million yuan in 2028, with gross margin increasing from 45% to 47%, above the margins of the appliance and standard power-supply businesses. A greater share of faster-growing, higher-margin businesses is an important source of overall profit recovery; some new products are still undergoing validation and testing, and delays in certification or shipments would postpone economies of scale.

Appliances remain the main source of revenue. Smart interaction and voice control increase the number of power-supply chips used in each appliance, while energy-efficiency requirements drive demand for low-standby-power and motor-driver chips. However, subsidy reductions and weak property-related demand weighed on domestic sales in the first half of 2026, while export growth provided support. Nomura expects appliance power-supply revenue to rise from 897 million yuan in 2026 to 1.152 billion yuan in 2028.
Higher wafer foundry and assembly and testing prices have depressed recent gross margins. Nomura assumes that the company will gradually pass some costs on to customers and improve its product mix, with the appliance business’s gross margin recovering from 34% in 2026 to 37% in 2028, still below 38.7% in 2025.
New standard power-supply products have secured large orders from several leading charger manufacturers serving equipment makers, but competition limits profitability improvements. Nomura expects revenue from this business to rise from 187 million yuan to 239 million yuan over 2026–2028, with gross margin recovering from 20% to 22%, also slightly below 22.4% in 2025.

Nomura forecasts revenue of 1.363 billion, 1.625 billion and 1.96 billion yuan, respectively, for 2026–2028, and net profit of 105 million, 159 million and 290 million yuan, respectively: profit first falls 43% year on year in 2026, before recovering in each subsequent year.
The model depends on both gross margin rising from 34.2% in 2026 to 38% in 2028 and the expense ratio falling from 29.4% to 26.9%. The bank is cautious about the pace of recovery from price increases and an improved product mix; its net profit forecasts for 2026 and 2027 are 48.2% and 35.8% below the Wind consensus as of 22 October, respectively.

Nomura bases its valuation on 2027, focusing on the potential for products such as AI server power supplies to ramp up from that year. It derives a target price of 79 yuan using forecast earnings per share of 1.20 yuan for 2027 and a price-to-earnings multiple of 66; the target multiple is close to the company’s five-year average.
Relative to the closing price of 59.47 yuan on 22 October 2026, the target implies upside of 32.8%; the share price at the time was about 50 times Nomura’s forecast earnings for 2027. The Buy call therefore incorporates both a recovery in earnings and a valuation moving closer to its historical level.