How did third-quarter growth compare with expectations?

  • In the third quarter of 2026, Sinoma Science & Technology reported revenue of 9.4 billion yuan, up 12.4% year on year and 0.1% quarter on quarter. Net profit was 702 million yuan, up 45.9% year on year and 0.3% quarter on quarter, broadly flat compared with 700 million yuan in the second quarter.
  • Morgan Stanley assessed the results as slightly below market consensus and expects consensus earnings per share estimates to be revised down slightly over the next 12 months, but its investment thesis on the company remains unchanged.

Which businesses drove the improvement in profitability?

  • Morgan Stanley believes the strong performance in the first three quarters came primarily from higher sales volumes and average selling prices in the glass fiber business, as well as higher shipments and average selling prices for lithium-ion battery separators in the third quarter. Improvements in volumes and prices across both businesses supported profit growth.
  • The company’s overall gross margin in the third quarter was 22.4%, up 0.9 percentage points from 21.5% in the second quarter and above 19.1% a year earlier. This is a company-wide figure, not the gross margin of an individual business.

Why did profit grow faster than revenue in the first three quarters?

  • Revenue in the first three quarters of 2026 was 25.7 billion yuan, up 18.3% year on year; net profit was 1.91 billion yuan, up 29.1% year on year. Overall gross margin was 21.7%, up 2 percentage points year on year.
  • After excluding one-off items using the company’s methodology, recurring earnings for the first three quarters were 1.727 billion yuan, up 44.2% year on year. Impairment losses rose from 25 million yuan a year earlier to 103 million yuan, while government grants fell from 452 million yuan to 216 million yuan. Both changes constrained profit for the reporting period.

What does Morgan Stanley’s valuation assessment depend on?

  • Morgan Stanley rates Sinoma Science & Technology Overweight with a price target of 56.03 yuan; the closing price listed in the report for 23 October 2026 was 40.29 yuan. The bank uses a discounted cash flow method, with its valuation covering long-term cash flows from 2027 to 2037.
  • Upside factors include better-than-expected shipments and selling prices for specialty electronic glass fabric and lithium-ion battery separators, as well as better-than-expected raw material costs. Downside factors include lower-than-expected glass fiber shipments and selling prices, lower-than-expected wind power installations in China during the Fifteenth Five-Year Plan period, and rising raw material costs.