Why did Desay SV’s profit fall quarter on quarter despite better-than-expected third-quarter revenue?
Growth in smart cockpit products and higher memory prices lifted revenue, but rising research and development expenses and a net non-operating loss weighed on profit. Nomura believes automakers’ in-house development and a weak Chinese automotive market continue to put pressure on suppliers.
Original source：Nomura International (Hong Kong) Ltd.First published on Unhidea：Original source date：
Key takeaway
Desay SV’s third-quarter revenue recovered faster than profit. Nomura maintained its Buy rating while becoming slightly more cautious about the company’s near-term financial outlook.
Why did revenue recover while profit fell short of expectations?
Desay SV’s revenue in the third quarter of 2026 was 9.5 billion yuan, up 24% year on year and 13% quarter on quarter. It exceeded market expectations and improved markedly from the first half of the year. Nomura believes growth came mainly from smart cockpit-related products and higher average selling prices for products due to rising memory prices.
Net profit attributable to the parent company was 591 million yuan over the same period, up 5% year on year but down 25% quarter on quarter and below market expectations. It was affected in part by a net non-operating loss totaling 120 million yuan.
What pressures are margins facing?
The third-quarter gross margin was 18.9%, up 0.4 percentage points year on year but down 0.6 percentage points quarter on quarter, remaining broadly stable overall.
Research and development expenses rose 17% year on year and 39% quarter on quarter, and the operating margin fell to 7.6%, down 2.0 percentage points quarter on quarter. Owing to a low base in the same period last year, it still rose 1.4 percentage points year on year.
Why does automakers’ in-house development change the position of suppliers?
Nomura believes that, as automotive intelligence advances in China, some automakers are developing their own intelligent driving solutions spanning hardware to software. When customers shift from purchasing products to outsourcing manufacturing, supply-chain companies’ gross margins will decline.
The weak Chinese automotive market is adding further pressure to the industry. Against this backdrop, Nomura believes Desay SV’s third-quarter results were not a negative surprise for the market, but has become slightly more cautious about the company’s near-term financial outlook.
What new areas is the company pursuing, and how does Nomura value it?
The company is exploring products related to integrated cockpit and driving systems and humanoid robots. Its factory in Spain has begun operations, and Nomura expects the contribution from overseas business to increase over the long term starting in 2028.
Nomura maintained its Buy rating and target price of 127 yuan. The target price is based on its forecast of 4.72 yuan in earnings per share for 2026 and a price-to-earnings multiple of 27.
