Sieyuan Electric’s revenue rises without matching profit growth: margins under pressure as BofA cuts earnings forecasts but remains optimistic about exports
In the third quarter of 2026, Sieyuan Electric’s revenue rose 31% year on year, while net profit attributable to shareholders grew just 4.5%, below BofA’s expectations. BofA cut its earnings forecasts for the next three years and its price target while maintaining its Buy rating.
Original source：BofA Global ResearchFirst published on Unhidea：Original source date：
Key takeaway
A higher share of revenue from energy storage and slower recognition of high-margin product sales weighed on margins, but BofA believes Sieyuan Electric’s strengths in transmission and distribution equipment and its diversified overseas markets continue to support long-term growth.
Why didn’t revenue growth translate into matching profit growth?
In the third quarter of 2026, Sieyuan Electric’s revenue was approximately 7 billion yuan, up 31% year on year; net profit attributable to shareholders was 939 million yuan, up 4.5% year on year and below BofA’s previous forecast of 1 billion yuan.
Third-quarter gross margin was 30.9%, below 31.6% in the second quarter and 33.3% a year earlier. BofA attributed the decline to a higher revenue contribution from the energy storage systems business, alongside slower-than-expected recognition of sales of high-margin switchgear and transformer products.
Profit was also affected by foreign exchange losses, impairment charges, lower government subsidies, losses from changes in fair value and a reduction in Sieyuan Electric’s ownership stake in Sieyuan Toshiba. Foreign exchange losses exceeded 130 million yuan in the first three quarters of 2026.
What guidance did management give for full-year orders and revenue?
At the earnings meeting, management reaffirmed its 2026 guidance of 37.5 billion yuan in new orders and 27 billion yuan in sales revenue, representing year-on-year growth of 30% and 25%, respectively, and expects margins to remain relatively stable.
The company secured approximately 400 million yuan in new US orders in September 2026 and expects to secure another approximately 1 billion yuan from October to November. BofA also listed the US Department of Energy’s bill targeting electrical equipment as a key near-term focus.
Why did BofA cut its earnings forecasts and price target?
BofA cut its forecasts for net profit attributable to shareholders for 2026 through 2028 by 10%, 17% and 22%, respectively, to 3.611 billion yuan, 4.446 billion yuan and 5.239 billion yuan. It raised its 2026 revenue forecast slightly by 1%, but lowered its gross margin forecast from 31.4% to 29.9%, indicating that the change in margins was an important factor in the earnings downgrade for that year.
BofA lowered its price target from 198 yuan to 160 yuan and switched its valuation basis to 28 times forecast earnings for 2027; it previously used 33 times average forecast earnings for 2026 and 2027. The lower valuation multiple reflects declining margins and geopolitical risks.
What supports the Buy rating?
BofA is optimistic about the company’s overall strengths in transmission and distribution equipment and its diversified overseas markets, and expects energy storage to become a new growth driver once capacity ramps up.
Tight supply and demand for transformers overseas provides the industry backdrop: industry participants cited by BofA said lead times for high-voltage transformers can reach 2 to 3 years; China’s transformer exports by value grew 28% year on year in the first three quarters of 2026, and BofA expects full-year growth of 25% to 30%.
Overseas expansion remains subject to the trade and geopolitical environment. Downside risks listed by BofA include higher-than-expected tariffs in the US and other regions, geopolitical risks in Europe and the US, and declining margins in overseas markets.
