Invictus revenue grew 33% in the third quarter. Why did profit barely budge?
Higher customer advances and improved operating cash flow indicate that demand remains supported, but domestic price competition and the expansion of lower-margin products continue to weigh on margins. Nomura maintains its Buy rating and price target of 125 yuan.
Original source：Nomura International (Hong Kong) Ltd.First published on Unhidea：Original source date：
Key takeaway
Invictus continues to see growth in revenue and order demand, but price competition and changes in its product mix meant that third-quarter profit growth was far below revenue growth.
Why did revenue growth not translate into comparable profit growth?
In the third quarter of 2026, Invictus reported revenue of 1.933 billion yuan, up 33.1% year on year; net profit attributable to shareholders was 184 million yuan, up just 0.3% year on year. Revenue and net profit increased 5.0% and 4.4%, respectively, from the second quarter.
Revenue rose 22.9% year on year in the first three quarters, while profit fell 7.6%. Revenue grew rapidly in the quarter, but profit remained under pressure.
What pressures are margins facing?
The third-quarter gross margin was 27.8%, down 1.6 percentage points year on year but up 2.5 percentage points quarter on quarter; the net margin was 9.5%, down 3.1 percentage points year on year.
Nomura believes that continued price competition in China's data-center and energy-storage thermal-management markets, along with an unfavorable product mix, may explain the year-on-year decline in gross margin. Domestic end customers are sensitive to prices, and competitive pressure may persist for longer.
The company is expanding its thermal-management business for electronic components. These products have relatively lower margins than traditional products and continue to weigh on overall margin expansion.
What signals do orders and cash flow provide?
As of the end of September 2026, contract liabilities had risen 188% from the beginning of the year, driven mainly by higher customer advances. On this basis, Nomura believes the company has a substantial order backlog.
Operating cash flow rose 167% year on year in the first three quarters. Nomura believes the company's air-cooling and liquid-cooling businesses continue to enjoy robust demand in domestic and overseas markets.
Nomura maintains its Buy rating and discounted-cash-flow-based price target of 125 yuan, equivalent to 39 times its fiscal 2027 earnings-per-share forecast of 3.18 yuan; the share price shown in the report corresponds to approximately 13.5 times.
