Citi: Silan’s third-quarter profit nears break-even; earnings forecasts cut for two years

Where did third-quarter results fall short?

Silan’s revenue in the third quarter of 2026 was 3.676 billion yuan, up 9% year on year and down 2% quarter on quarter, missing the market consensus and Citi’s forecast by 11% and 8%, respectively. Citi attributed the revenue shortfall to weak white goods demand, which slowed growth in intelligent power modules (IPMs).
The third-quarter gross margin was 17.5%, broadly flat with 17.4% in the second quarter but below the market consensus of 21.5%. Operating expenses rose 11% year on year to 529 million yuan, or 14.4% of revenue, up from 12.6% in the second quarter.

Third-quarter net profit was 18 million yuan, down 79% year on year and far below the Bloomberg consensus of 209 million yuan and Citi’s previous forecast of 339 million yuan.
Price fluctuations in investment holdings resulted in a 93 million yuan loss from changes in fair value, compared with a 202 million yuan gain on the item in the second quarter. Apart from this non-recurring impact, revenue and gross margin also fell short of expectations, indicating that investment items were not the only cause of pressure on profit.

Citi noted that demand from data centers and servers drove strong sales of silicon carbide (SiC) products, while weak appliance demand put pressure on the IPM business. The bank believes price competition in discrete power devices remains intense, limiting the extent to which revenue growth translates into profit recovery.
Citi expects new applications, including the construction of AI data centers in China, to improve industry supply and demand. A recovery in automotive and consumer electronics demand, new customers or design wins for IGBTs and SiC, and slower growth in industry supply could all improve the outlook; conversely, aggressive capacity expansion or intensifying competition would restrain the recovery.

Citi cut its revenue forecasts for 2026 and 2027 by about 5% each, to 14.663 billion yuan and 16.519 billion yuan, respectively. It lowered its gross margin forecasts for the same years from 21.3% and 22.2% to 17.9% and 20.5%.
Weaker gross profit expectations led to larger cuts in earnings forecasts: the 2026 net profit forecast fell from 1.265 billion yuan to 609 million yuan, and the 2027 forecast from 1.595 billion yuan to 1.024 billion yuan, cuts of 52% and 36%, respectively.
Citi maintained its Neutral rating and lowered its target price from 30 yuan to 24 yuan. The new target uses a 2027 forecast price-to-earnings multiple of 39 times, half a standard deviation below the company’s five-year average valuation. The bank expects continued price competition to weigh on earnings.