Goldman Sachs: Bochu’s third-quarter revenue rises 17% as product mix and raw-material costs weigh on gross margin

Why did margins come under pressure despite third-quarter growth?

Bochu reported third-quarter revenue of 601 million yuan and net profit of 313 million yuan, up 17% and 19% year on year, respectively. Goldman Sachs said overall results were broadly in line with its expectations, although revenue was 5% below its forecast and operating profit was 13% lower; net profit was broadly in line.
Revenue grew faster than gross profit: third-quarter gross profit was 426 million yuan, up 8% year on year. Gross margin was 71%, down 6 percentage points year on year and 2 percentage points quarter on quarter, and 3 percentage points below Goldman Sachs’ forecast. Operating margin was 45%, down 6 percentage points year on year.

Goldman Sachs noted that gross margin continued to decline quarter on quarter, partly because laser cutting heads and welding control systems contributed a greater share of revenue, changing the product mix, and partly because costs rose for raw materials such as memory chips, cameras and sensors.
Management expects the effect of product mix on gross margin to persist and plans to keep the gross margin of individual products stable. This means changes in the revenue mix can still affect overall gross margin even if each product’s own margin remains stable.

Third-quarter revenue from flat-sheet, tube and 3D solutions was approximately 290 million yuan, 140 million yuan and 17 million yuan, respectively, with year-on-year growth of approximately 4%–5%, 15% and 15%, respectively. Domestic demand remained resilient, supported in part by replacement demand arising from the 3–5-year renewal cycle for high-speed laser equipment; overseas sales remained weak.
Shipments of robotic welding systems exceeded 1600 units in the first three quarters, surpassing the 1400 units shipped in all of 2025, with revenue of approximately 90 million yuan. Management maintained its 2026 targets of 2500 units shipped and revenue exceeding 100 million yuan.
Shipbuilding-related projects currently account for less than 10% of the welding systems business; management expects this segment to double year on year in 2027–2028.

Goldman Sachs expects the company to further expand its share of high-power laser control systems through research and development, lower average selling prices, customer relationships and bundled solutions for small and medium-sized enterprises. The company is also expanding into cutting heads, software and robotic welding control.
The bank sees gains in high-power system market share, new businesses and overseas expansion as potential catalysts, but considers the stock’s current upside limited. Goldman Sachs made minor downward revisions of up to 1% to its earnings per share forecasts for 2026–2030, maintaining its Neutral rating and 12-month price target of 108 yuan; the target is based on a forecast price-to-earnings multiple of 30 times for 2027.