Goldman Sachs maintains Buy on Kstar and Neutral on Kehua and Megmeet, focusing on 2H26 overseas expansion and domestic data center capex
AI summary card
Goldman Sachs maintains Buy on Kstar and Neutral on Kehua and Megmeet, focusing on 2H26 overseas expansion and domestic data center capex
The report believes apparent growth in China's data center electrical sector is still present in 2Q26, but FX, domestic price competition, raw material costs, and technology transitions will determine 2H share price catalysts and room for valuation re-rating.
- Kstar is maintained at Buy with a 12-month target price of Rmb67.0, implying 99.8% upside from the current price of Rmb33.53; Goldman Sachs is positive on its overseas AIDC customer expansion, UPS orders, 800VDC product testing, and overseas ESS recovery.
- Kehua is maintained at Neutral, with the 12-month target price lowered to Rmb35.0; the 1H26 net profit guidance was boosted by one-off asset disposal gains, but recurring net profit was below expectations, while domestic data center and energy storage price competition remains a pressure.
- Megmeet is maintained at Neutral with a 12-month target price of Rmb112.0, implying 18% downside from the current price of Rmb136.59; server power supplies and home appliance control drove 2Q26 growth, but valuation, rising raw material costs, Vera Rubin/800VDC validation, and capacity-order matching still require observation.
- Key points to watch in 2H26 include overseas new customers and orders, 800VDC commercialization progress, capex by domestic hyperscalers and colos, the sustainability of overseas energy storage growth, and the ability to pass on raw material costs to customers.
Report interpretation
Overview
This report covers China's data center electrical sub-sector and three companies: Kstar, Kehua, and Megmeet. Goldman Sachs notes that the three stocks have fallen an average of 29% since July, significantly underperforming the CSI 300 Index and the average performance of its China Industrial Tech coverage. Therefore, overseas expansion in 2H26, domestic data center capex trends, and the quality of 2Q26 earnings have become the core variables for market re-pricing. The report maintains Buy on Kstar and Neutral on Kehua and Megmeet.
Core views
The core view is that Kstar offers more attractive risk-reward, benefiting from overseas UPS ODM shipments, progress in 800VDC products, and overseas ESS demand; Kehua remains a representative play on domestic hyperscaler capex, but domestic pricing pressure and the pace of overseas breakthroughs limit upside; Megmeet is transforming from an automation control company into a global AI server power supply competitor, but its current valuation already reflects a substantial amount of growth expectations, with the next stage depending on Vera Rubin, GB200/GB300, 800VDC, and large-scale mass production execution.
Analysis framework
The report adopts a company-by-company preview and catalyst tracking framework: it first assesses 2Q26 forecasts for revenue, gross profit, EBIT, and net profit, then breaks down the business drivers for data center products, energy storage, server power supplies, home appliance control, EV components, and solar inverters; it then combines target price methodology, P/E valuation, cost-of-capital discounting, and order/customer progress to determine ratings and risk-reward.
Methodology notes
P/E multiple valuation discounted to the target year
Kstar's target price is based on 26x 2028E P/E discounted by an 11% cost of equity; Kehua's target price is based on 30x 2027E P/E; Megmeet's target price is based on 32x 2028E P/E discounted by an 11% cost of equity.
Quarterly revenue, gross profit, EBIT, and net profit forecast bridge
The report provides 2Q26 forecasts for revenue, gross profit, EBIT, and net profit for each of the three companies, and explains that year-over-year changes are driven by product mix, overseas orders, domestic competition, FX losses, raw material costs, and expense investment.
Growth, financial returns, valuation multiples, and composite factor profile
Goldman Sachs discloses that its factor profile is based on the relative percentiles of growth, financial returns, valuation multiples, and composite indicators, and is used to provide investment context for stocks relative to the market and industry peers.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Shenzhen Kstar Science & Tech (002518.SZ)Core positive name, rated Buy
- Strengths
- Long-term leader in UPS shipments, with overseas AIDC customer expansion, overseas UPS ODM orders, progress in 800VDC modules and systems, strong overseas ESS demand, and valuation that is attractive relative to long-term growth.
- Weaknesses
- 2Q26 is weighed down by about Rmb20mn of FX losses, solar inverters are declining sharply due to weak domestic installations, and the ESS growth cycle is relatively short with sustainability requiring more order validation.
- Comparison
- Compared with Kehua, the report believes Kstar is making faster progress in overseas expansion, especially related to North America; compared with Megmeet, its valuation and upside are more attractive.
- Risks
- US ODM order growth below expectations, new product launches such as 800VDC slower than expected, and overseas ESS growth and margins below expectations.
- Kehua Data Co. (002335.SZ)Representative name for domestic data center capex, rated Neutral
- Strengths
- Leading player in China's UPS market, with power management solutions covering data centers and other industries, improving domestic data center construction, Alibaba modular power distribution and CDU orders, and overseas utility-scale ESS PCS opportunities.
- Weaknesses
- 1H26 recurring net profit was below expectations, competition in domestic data center and energy storage businesses is intense with strong pricing pressure, and overseas breakthroughs, especially in the US supply chain, are slower than Kstar.
- Comparison
- More of a proxy for domestic hyperscaler capex, but the current share price already reflects a considerable amount of domestic capex growth expectations; overseas progress is weaker than Kstar.
- Risks
- The pace of overseas expansion, the strength of domestic hyperscaler capex, and the intensity of pricing competition in domestic data center and ESS markets could all create upside or downside risk.
- Megmeet (002851.SZ)AI server power supply transformation play, rated Neutral
- Strengths
- Has secured GB200/GB300-related 5.5kW PSU orders, strong 2Q26 growth in server power supplies and home appliance control, and entry into the NVIDIA MGX ecosystem validates its R&D capabilities.
- Weaknesses
- Current valuation is high, there is still a gap in high-efficiency product mix versus top-tier peers such as Delta Electronics, and rising raw material costs, weak EV components, and ongoing R&D and sales investment create pressure.
- Comparison
- Compared with Kstar and Kehua, Megmeet has more direct exposure to AI server PSUs and next-generation 800VDC power architecture, but also faces higher valuation and greater product validation uncertainty.
- Risks
- Slower-than-expected share gains in the NVIDIA ecosystem, product validation progress in the ASIC supply chain below expectations, weaker execution in large-scale mass production, a longer 800VDC R&D cycle, and changes in the sustainability of global AI capex and AIDC supply-demand.
Key data
- Kstar 2Q26 forecastRevenue/gross profit/EBIT/net profit of Rmb1,561mn/Rmb468mn/Rmb203mn/Rmb170mn, YoY +28%/+34%/+45%/+20%Growth was mainly driven by overseas energy storage and data center products, but about Rmb20mn of FX losses weighed on net profit growth.
- Kstar target price and valuation12-month target price Rmb67.0; current price Rmb33.53; upside 99.8%The target price is maintained unchanged, based on 26x 2028E P/E discounted by an 11% cost of equity; Buy is maintained.
- Kehua 2Q26 forecastRevenue/gross profit/EBIT/net profit of Rmb2,793mn/Rmb609mn/Rmb155mn/Rmb300mn, YoY +11%/+7%/-9%/+72%The sharp net profit growth was mainly driven by one-off gains from data center asset disposals, while recurring net profit was below expectations.
- Kehua target price and rating12-month target price Rmb35.0, previous Rmb37.24; current price Rmb29.75; upside 17.6%2026-30E net profit forecasts are cut by 5%, and Neutral is maintained.
- Megmeet 2Q26 forecastRevenue/gross profit/EBIT/net profit of Rmb3,300mn/Rmb759mn/Rmb173mn/Rmb140mn, YoY +40%/+52%/+256%/+110%Server power supplies, GB200/GB300 orders, and the home appliance control business are the main growth drivers, while EV components remain weak.
- Megmeet target price and rating12-month target price Rmb112.0; current price Rmb136.59; downside 18%2026-30E net profit forecasts are basically unchanged, and Neutral is maintained.
Impact & implications
From an investment implication perspective, a short-term sector rebound requires confirmation from both orders and technology validation. If Kstar delivers on overseas UPS, 800VDC field testing, and long-term ESS orders, it may ease market concerns about UPS being replaced by 800VDC and trigger valuation re-rating; Kehua needs faster domestic hyperscaler tendering and overseas certification breakthroughs to offset domestic pricing pressure; Megmeet needs to prove AI server PSU share gains, ramp-up of Vera Rubin-related products, 800VDC commercialization, and pricing pass-through ability to support its current relatively high valuation.
Risks
- Intensifying price competition in domestic data center products and energy storage businesses may compress gross margins.
- RMB appreciation may lead to FX losses and has already affected Kstar's 2Q26 net profit forecast.
- Commercialization of the 800VDC architecture may change the competitive landscape for UPS and server power supplies; if product validation or customer ramp-up is slower than expected, valuations will come under pressure.
- Overseas expansion faces risks from customer certification, order delivery, and geopolitical restrictions, including potential restrictions in Europe and the US on Chinese inverter or energy storage products.
- Rising raw material costs may weaken margins for companies such as Megmeet, and whether price increases can be smoothly passed through remains uncertain.
- Weak domestic EV demand and sluggish solar installations are dragging on related business revenue.
- One-off asset disposal gains may mask the weakness in Kehua's recurring profit performance.
What to watch
- Whether Kstar's overseas UPS new customers, new orders, and UPS sales growth from 2H26E to 2027E continue to materialize.
- Progress of Kstar's 800VDC power rack field testing with overseas customers in 3Q26E and small-batch orders before the end of 2026.
- The pace of tendering, capex, and data center construction by domestic hyperscalers and colos from 2H26E to 2027E.
- Kehua's direct and indirect orders from Tencent, Alibaba, and Southeast Asian colo customers, as well as global certification progress for power distribution and CDU.
- Kehua's 2027E overseas utility-scale energy storage growth and margin guidance, as well as geopolitical policy changes in Europe and the US.
- Megmeet's Vera Rubin cabinet ramp-up, share allocation of 18.5kW PSU and 110kW power shelf, and progress with new customers for 5.5kW products.
- Megmeet's 800VDC power rack sample orders, commercialization timetable, and industry positioning.
- Customer feedback after Megmeet's price increases, changes in shipment volume and margins across businesses, and the order and capacity support corresponding to its HK IPO application.