Nomura Orient International Securities: Sieyuan Electric’s third-quarter revenue rises without matching profit growth; strong overseas orders offset by lower margins in energy storage

Why did profit fail to keep pace with revenue growth?

In the third quarter of 2026, Sieyuan Electric reported revenue of 6.97 billion yuan, up 30.7% year on year and 11.9% quarter on quarter. Net profit was 939 million yuan, up 4.5% year on year and 2.8% quarter on quarter. Revenue met Nomura Orient International Securities’ expectations, while profit fell short.
Product mix was one of the main reasons: the faster-growing energy storage business accounted for a higher share of revenue, while its gross margin in the first half of 2026 was 10.5%, below the group-wide 30.5%, pulling down the overall gross margin. The overall gross margin in the third quarter was 30.9%, down 2.4 percentage points year on year and 0.7 percentage points quarter on quarter.
Foreign exchange also added pressure. Net finance income of 35 million yuan in the first three quarters of the previous year turned into net finance costs of 144 million yuan in the same period of 2026. The forward foreign-exchange discount limited the effectiveness of hedging.

According to the company’s investor relations communication record dated 24 October, preliminary growth in new orders in the first three quarters of 2026 exceeded the company’s full-year target of 30%, with stronger growth in overseas orders. Europe, the Middle East and Africa accounted for a higher share of new overseas orders; the Americas grew fastest, driven mainly by North America.
At the end of the third quarter, contract liabilities stood at 4.41 billion yuan, up 52.2% year on year and 48.1% from the beginning of the year. Nomura Orient International Securities believes growth in overseas orders and new capacity across multiple product lines will support long-term revenue.
The ultra-high-voltage GIS factory has commenced production and can supply equipment rated at 1000 kilovolts. Construction has begun on the Changzhou Sieyuan Toshiba extra-high-voltage factory, with trial production planned from month 7 through August of 2027. A large-scale energy storage facility has been completed, and supercapacitor capacity expansion is underway. Whether orders can be converted into revenue remains subject to the pace of capacity ramp-up and the performance of domestic and overseas orders.

Taking into account the higher revenue share of the low-margin energy storage business, Nomura Orient International Securities lowered its gross margin forecasts for 2026–2028 by 0.6, 0.7 and 0.9 percentage points, respectively, to 30.8%, 31.0% and 31.1%. It also cut its net profit forecasts for the same period by 6.5%, 3.4% and 4.8%, respectively, to 3.71 billion yuan, 5.14 billion yuan and 6.82 billion yuan.
Citing lower expected profitability and a decline in comparable-company valuations, the brokerage reduced its target price-to-earnings multiple from 35 times to 25 times. Using its 2027 earnings-per-share forecast of 6.53 yuan, it cut its target price from 238 yuan to 163.28 yuan, implying 54.9% upside from the 27 October 2026 closing price of 105.42 yuan. The brokerage maintained its buy rating and retained a premium to the average valuation of comparable companies because it expects the company’s earnings to grow faster than those of its peers.