Bank of America: Shuanghuan Driveline’s third-quarter revenue rises 14%, while foreign-exchange losses weigh on profit

Why did profit fall short of expectations despite revenue growth?

In the third quarter of 2026, Shuanghuan Driveline’s revenue was 2.559 billion yuan, up 14.4% year on year and 3.9% quarter on quarter. Operating profit after excluding relevant items was 397 million yuan, up 16.4% year on year and broadly in line with Bank of America’s expectations.
Net profit attributable to shareholders was 333 million yuan, up 3.8% year on year and 12.2% below Bank of America’s forecast of 380 million yuan. Bank of America attributed the shortfall mainly to higher-than-expected foreign-exchange losses.
The third-quarter gross margin was 26.8%, up 0.7 percentage points quarter on quarter. The operating expense ratio was 11.3%, down 0.1 percentage points quarter on quarter. The improvement in operating performance did not fully translate into attributable profit.

Third-quarter sales of new energy vehicle gears rose 26% year on year and 18% quarter on quarter, accounting for approximately 51%–52% of total company sales. Sales of gears for internal combustion engine vehicles fell 14% year on year and accounted for approximately 14%–15% of sales.
Management is optimistic about overseas expansion in new energy vehicle gears and rising penetration of coaxial gears in overseas markets. The new Hungarian plant began production in the first half of 2026 and is ramping up; it will support the company’s expansion in Europe.
Market demand drove construction machinery gear sales up 10%–20% year on year, while demand for industrial robots drove robotics reducer sales up 20%. Intelligent actuator sales rose 31%–32% year on year, accounting for approximately 9%–10% of total sales.

The company expects to receive 50 million to 100 million yuan in humanoid robotics orders in the fourth quarter of 2026, with orders on hand reaching up to 200 million yuan by the end of 2026, supporting sales growth in 2027.
Bank of America valued humanoid robot reducers separately in its segment valuation: it applied a price-to-earnings multiple of 50 to forecast 2030 net profit of approximately 37 million yuan, then discounted the result at 11% to arrive at a value of approximately 1.216 billion yuan, or 3% of its estimated total value.

Taking into account the performance of construction machinery, reducers and new energy vehicle gear exports, Bank of America raised each of its revenue forecasts for 2026–2028 by approximately 1%, while lowering its earnings-per-share forecasts for the same years by approximately 4%, 1% and 1%, respectively. Its forecast for 2026 net profit attributable to shareholders is 1.309 billion yuan, up approximately 3.8% year on year.
Bank of America raised its price target from 45 yuan to 47 yuan and reiterated its Buy rating. In its valuation, the bank continues to apply a price-to-earnings multiple of 26 to the gears and industrial robot reducers businesses, but shifted the valuation basis from average forecast earnings per share for 2026–2027 to forecast earnings per share for 2027.
Downside risks identified by Bank of America include slower-than-expected order wins from major global electric vehicle customers, a slower ramp-up or low utilization of new capacity, and rising raw material prices.