Why did net profit miss expectations despite revenue growth?

  • Third-quarter 2026 revenue was 2.159 billion yuan, up 9% year over year and 1% below Goldman Sachs expectations; net profit was 87 million yuan, down 14% year over year and 32% below Goldman Sachs expectations.
  • Goldman Sachs said the profit miss was mainly due to approximately 36 million yuan in equity incentive expenses and lower government subsidies during the quarter. Excluding equity incentive expenses, adjusted net profit rose 5% year over year.
  • A higher share of overseas energy storage business lifted the company's overall third-quarter gross margin to 26%, up 1 percentage points year over year; however, domestic data center and smart power businesses remained under pressure from rising costs and competition.

What could accelerate the data center business?

  • Goldman Sachs estimates third-quarter data center product revenue at 736 million yuan, up 12% year over year, below the 15% recorded in the first half. The company disclosed a gross margin of 28% for the business in the quarter, with rising raw material prices and competition for projects from large domestic cloud customers continuing to exert pressure.
  • The company still expects the business's revenue to grow 20%–30% in 2026 and expects overseas shipments to lift fourth-quarter growth. A recently secured order for AI power solutions for a Southeast Asian data center is worth approximately 400 million yuan; shipments are planned to start in the fourth quarter and continue through 2027. The company expects its gross margin to be higher than that of domestic projects.
  • Goldman Sachs expects the business's revenue to grow 20% and 23% in 2026 and 2027, respectively, with gross margins of 29% and 30%. The company is also advancing validation of liquid cooling products with overseas customers.

Why does overseas energy storage improve gross margin?

  • Goldman Sachs estimates third-quarter energy storage revenue at approximately 799 million yuan, up 18% year over year: overseas revenue rose 75%, while domestic revenue fell 18%. Overseas revenue is now comparable in size to domestic revenue.
  • Gross margin on overseas energy storage is above 35%, versus above 10% domestically. The higher overseas share therefore lifted the gross margin of the new energy products business, which is primarily energy storage, by 6 percentage points year over year in the first three quarters of 2026. The company expects full-year revenue growth of 5%–15% for the business.
  • Goldman Sachs expects energy storage revenue to grow 16% and 17% in 2026 and 2027, respectively, with gross margins of 24% and 25%. Management is optimistic about demand for large-scale energy storage outside China in 2027, while noting that Western European customers are more concerned about geopolitical impacts than Eastern European customers.

What has changed in other businesses and the valuation assessment?

  • Goldman Sachs estimates third-quarter IDC services revenue at 294 million yuan, down 10% year over year. Depreciation increased after a new data center began operating at the start of the year, and the business's gross margin fell 6 percentage points year over year in the first three quarters. Smart power product revenue rose 16% year over year in the third quarter, but its gross margin for the first three quarters was 36%, below 39.6% in 2025.
  • Taking account of third-quarter results and higher selling, general and administrative expenses, Goldman Sachs lowered its net profit forecasts for 2026–2030 by an average of 11% and cut its 12-month target price from 32 yuan to 28 yuan, maintaining its Neutral rating. The target price remains based on 30 times forecast 2027 earnings; Goldman Sachs believes the current share price already reflects the outlook for growth in domestic data center capital expenditure.