Bernstein: Piotech’s third-quarter revenue misses expectations; doubled orders and improved margins support the outlook

Why did revenue miss expectations?

Third-quarter revenue in 2026 was 2.308 billion yuan, up 1.8% year on year and 28.2% quarter on quarter, missing Bernstein’s forecast and the market consensus by 16% and 15%, respectively.
Bernstein believes the revenue shortfall mainly reflects normal fluctuations in recognition timing, rather than weaker demand: payment timing by a small number of major customers can significantly affect a single quarter’s revenue. Revenue growth of 124.2% year on year in the third quarter of 2025 also raised the comparison base.
The firm also notes that, when market sentiment is weak, investors may interpret slower year-on-year revenue growth as a sign of weakening demand.

Third-quarter gross margin was 42.5%, above both the market consensus of 40.4% and the second quarter’s 40.6%. Recurring net profit was 561 million yuan, and net margin rose from 14.7% in the second quarter to 24.3%. Bernstein attributes the improvement in profitability to economies of scale.
Reported net profit for the quarter was 1.088 billion yuan, well above recurring net profit. The report attributes the substantial net profit beat to investment gains, so the two profit measures need to be considered separately.
Management said new orders faced no pricing pressure because customers placed greater importance on delivery lead times than prices, and expects gross margin to remain at its current level in 2027.

Management said new orders doubled year on year in the first three quarters of 2026. The share of orders from ChangXin Memory Technologies and Yangtze Memory Technologies declined because orders from other memory and logic customers grew faster.
The company has limited concerns about component shortages: as of the report, there had been no shipment delays, and local suppliers were available as alternatives for all globally sourced components.
Bernstein continues to list the unexpected loss of key customers, lower-than-expected capital expenditure by Chinese fabs, and technology or capacity bottlenecks slowing the substitution of domestic equipment as downside risks.

Bernstein cut its 2026 revenue forecast from 9.028 billion yuan to 8.442 billion yuan, implying year-on-year growth of 30% and coming in about 8% below market consensus. It also expects 2027 revenue to reach 15.873 billion yuan, up 88% year on year and 18% above consensus.
The firm expects inventory at the end of 2026 to rise to 12.332 billion yuan from 7.826 billion yuan at the end of 2025, changes in working capital to consume 8.118 billion yuan in cash, and full-year operating cash flow to be negative 5.161 billion yuan. Its model shows both profit growth and cash-flow pressure.
Bernstein maintained its Outperform rating and 1200 yuan target price, using forecast earnings per share of 34.43 yuan for 2028 and a price-to-earnings multiple of 35. The valuation multiple was raised from 34 previously.