Nomura: NARI Technology: Revenue rose 12%, but profit fell. Can ultra-high-voltage orders carry growth forward?

Why did profit fall despite third-quarter revenue growth?

In the third quarter of 2026, the company reported revenue of 16.1 billion yuan, up 12% year on year and down 11% quarter on quarter. Nomura attributed the year-on-year revenue increase mainly to strong demand in the low-carbon energy business and continued growth in the smart-grid business.
Gross margin for the period was 25.6%, down 0.9 percentage points year on year. Nomura attributed the decline to a higher share of revenue from non-grid businesses and rising costs for electronic components such as memory chips and PCBs.
Net profit attributable to shareholders was 1.84 billion yuan, down 3% year on year and 22% quarter on quarter. In addition to pressure on gross margin, renminbi appreciation combined with a higher share of overseas revenue brought greater foreign-exchange losses, bad-debt provisions for non-grid and overseas businesses increased, and software VAT refunds were also delayed.

Operating cash flow turned to a net outflow of 3.5 billion yuan in the third quarter, which Nomura attributed to shorter payment terms for payables. As profit declined, changes in payment timing also put pressure on cash flow during the quarter.

Nomura believes ultra-high voltage remains a focus of grid investment during China’s Fifteenth Five-Year Plan. According to the National Energy Administration, China is expected to build 15 ultra-high-voltage direct-current lines for green power in 2026–2030; NARI Technology supplies converter valves, a core component of those lines, and therefore stands to benefit.
According to management, the company’s ultra-high-voltage equipment revenue was approximately 4 billion yuan in the first three quarters of 2026, already exceeding the full-year 2025 level of less than 4 billion yuan. At the end of the third quarter, its ultra-high-voltage equipment order backlog stood at approximately 12 billion yuan. Nomura believes these orders will support growth in 2027–2028.
Order growth remains dependent on the timing of project tenders and the company’s share. Downside risks cited by Nomura include delays to ultra-high-voltage project tenders, a lower-than-expected share of contracts awarded for key products, and slower progress in overseas markets.

Nomura raised its revenue forecasts for 2026 and 2027 by 2.3% and 5.7%, respectively, mainly reflecting stronger-than-previously-expected growth in non-grid businesses such as energy storage systems. At the same time, it cut its gross-margin forecasts for each of the two years by 0.7 percentage points because of the change in revenue mix.
Citing factors including higher operating expenses, Nomura cut its net profit forecasts attributable to shareholders for 2026 and 2027 by 9.7% and 6.0%, respectively, to 8.601 billion yuan and 9.916 billion yuan.
Nomura maintained its buy rating and raised its target price from 27.0 yuan to 28.4 yuan. The valuation still uses a price-to-earnings multiple of 23 times, but the basis has rolled forward to forecast earnings per share of 1.23 yuan for 2027.