Nomura: Gotion High-Tech revenue rises 75% but swings to a loss; Nomura expects tax pressure to persist through 2027

Why did revenue growth not translate into profit?

In the third quarter of 2026, Gotion High-Tech reported revenue of 17.7 billion yuan, up 75% year on year and 10% quarter on quarter, in line with Nomura’s expectations. Nomura believes the growth may have come from a quarter-on-quarter increase in battery shipments and broadly stable average battery selling prices.
However, the company recorded a third-quarter net loss of 537 million yuan, compared with profits of 2.17 billion yuan in the same period a year earlier and 1.37 billion yuan in the second quarter of 2026. Nomura said the earnings miss was mainly due to a 785 million yuan loss from changes in fair value during the quarter, which may have been related to changes in the share prices of its holdings in Chery Automobile and a copper foil company.
The third-quarter gross margin was 15.3%, unchanged quarter on quarter but down 2.3 percentage points year on year; taxes and surcharges rose to 237 million yuan, an increase of 221% year on year. Nomura attributed the increase in taxes to China’s introduction of a consumption tax on battery product sales from September 2026.

Under the policy arrangements described in the report, the export VAT rebate rate will fall from 6% to zero on 1 January 2027, and the battery consumption tax rate is scheduled to rise from 2% to 4% on 1 September 2027. Nomura expects cost pressure to increase further if the company cannot pass the additional tax burden on to downstream customers.
Nomura believes the company has greater exposure to the domestic passenger electric vehicle market than some second-tier battery makers. As that market may face weaker demand and additional taxes, Nomura expects the company’s per-unit profitability to remain under pressure in 2027.

Nomura expects the company to deepen its cooperation with Volkswagen. Cell shipments to Volkswagen and the newly announced European cell and materials joint-venture plant will help improve the revenue mix over the long term.
Nomura also expects the company to accelerate its overseas capacity expansion in Morocco, Slovakia, Vietnam and Spain to mitigate the impact of headwinds in the domestic passenger electric vehicle market.

Taking into account fair-value losses and higher taxes and surcharges, Nomura lowered its net profit forecasts for 2026 and 2027 from 2.103 billion yuan and 2.819 billion yuan to 1.149 billion yuan and 2.339 billion yuan, respectively, cuts of approximately 45% and 17%.
Nomura maintained its neutral rating and raised its target price from 22.50 yuan to 23.20 yuan, switching its valuation basis to forecast 2027 earnings per share of 1.29 yuan and applying a price-to-earnings multiple of 18 times, below the 19 times previously used. The target price is approximately 0.3% above the closing price of 23.13 yuan on 29 October 2026.