Morgan Stanley: Bethel's third-quarter brake-by-wire sales ramp up, but revenue growth has yet to lift its own profit

Why hasn't revenue growth translated into profit growth?

In the third quarter of 2026, Bethel's revenue rose 34% year over year to approximately 4.3 billion yuan, while net profit rose 5% to 388 million yuan, in line with market expectations.
Morgan Stanley estimates that the increase in profit came mainly from consolidating Yubei, while Bethel's own profit was broadly flat. Excluding Yubei, the company's own revenue rose 10% year over year to 3.5 billion yuan.
The third-quarter net margin was 9.1%, down 2.5 percentage points year over year and 1.3 percentage points quarter over quarter; revenue expansion coincided with pressure on margins.

Brake-by-wire systems were the main source of growth: third-quarter sales volumes rose 41% year over year, electronic parking brake sales volumes rose 15%, while lightweight component sales volumes fell 2%.
Morgan Stanley noted that rising brake-by-wire penetration in Chery and Geely models supported Bethel's revenue growth. The product's upgrade from version 1.5 to version 1.6 also improved the third-quarter product mix.

The third-quarter gross margin was 20.3%, down 0.2 percentage points year over year, weighed down by the consolidation of Yubei; however, it rose 0.9 percentage points quarter over quarter, supported by an improved product mix.
Management expects the gross margin to continue improving quarter over quarter in the fourth quarter, driven by contributions from brake-by-wire version 2.1, the ramp-up of the Mexico plant and more in-house sourcing of components; optimization at Yubei is also a factor in further improvement.
Management's overseas revenue targets are 2 billion yuan in 2026 and 6 billion to 8 billion yuan in 2030. Within those targets, the Mexico plant's revenue target is 900 million to 1 billion yuan in 2026, with a target of 40% year-over-year growth in 2027 and a gross margin above 20%.
Morgan Stanley assigns an Overweight rating and a price target of 41 yuan. The bank believes that brake-by-wire penetration, WCBS 2.0 orders and the pace of their ramp-up, as well as cost concerns among domestic automakers, will all affect the company's outlook.