MGI Tech's second-quarter revenue continued to grow, with profitability improving but the company yet to break even

Overview

The report assesses MGI Tech's operating performance in 1H26 and the second quarter of 2026. Nomura believes that the company maintained double-digit revenue growth and improved its overseas business, product mix, and expense control, but net profit remained negative. It therefore maintained its Neutral rating and CNY52.46 target price.

Core views

MGI Tech announced its 1H26 results on August 21, 2026. First-half revenue increased 18.9% YoY to CNY1,366mn, implying 2Q26 revenue of approximately CNY780mn, up 15% YoY, indicating continued sales expansion. However, revenue growth did not yet translate into overall profitability: the 1H26 net loss attributable to shareholders was CNY158mn. Although the loss narrowed 6.4% YoY, the company remained loss-making. Net loss excluding non-recurring gains and losses narrowed by a greater 20.9% YoY to CNY161mn, but the company still did not break even. By region, 1H26 revenue in the China market increased 12.0% YoY to CNY857mn. Management stated that the company maintained a solid market-leading position domestically. Overseas revenue grew faster, rising 33.8% YoY to CNY483mn, mainly due to a rebound in growth in the Americas. The growth structure presented by Nomura was therefore as follows: the domestic business provided a relatively stable foundation, while overseas markets, particularly the Americas, became a faster source of incremental growth. Operational improvements came from gross margin expansion and expense control. The 1H26 gross margin increased by approximately 3 percentage points YoY to 57.0%, which the report attributed to revenue growth and a product mix shift toward reagents. Operating expenses declined 12.7% YoY to CNY804mn during the same period. Selling, administrative, and R&D expenses decreased 6.8%, 13.1%, and 18.4% YoY, respectively, to CNY322mn, CNY204mn, and CNY277mn. Revenue growth, a higher share of high-margin products, and reductions in all three major expense categories jointly improved operating profit performance, but were insufficient to eliminate the net loss. Nomura maintained its Neutral rating and CNY52.46 target price for MGI Tech. The report listed a closing price of CNY74.79 on August 21, 2026. The rating uses a relative benchmark framework, with the CSI 300 Index serving as MGI Tech's benchmark. A Neutral rating indicates that the stock is expected to perform broadly in line with the benchmark over the next 12 months. The target price was derived using a DCF model, with core assumptions of a 10.5% WACC and a 4.5% terminal growth rate. The report explicitly recommended closely monitoring the company's persistent losses and identified geopolitical risks and dependence on related parties as downside risks. Increased domestic commercial opportunities and stronger-than-expected overseas sales represented upside risks.

Analysis framework

The report first estimated second-quarter revenue and YoY growth based on the first-half results, then broke down the sources of growth between the China and overseas markets. It subsequently analyzed changes in gross margin, product mix, and selling, administrative, and R&D expenses to determine whether operating improvements could translate into net profit. Finally, it used a DCF model to derive the target price and reached a Neutral conclusion based on the CSI 300 relative rating framework and upside and downside scenarios.

Methodology notes

• Valuation methodologyDCF discounted cash flow

  DCF target price valuation

  The report discounted the company's future cash flows to present value and derived a CNY52.46 target price using a 10.5% weighted average cost of capital and a 4.5% terminal growth rate as its core assumptions.

• (Out-of-vocabulary methodology)

  Relative benchmark rating framework

  Nomura uses the CSI 300 Index as the stock's benchmark. A Neutral rating indicates that the analyst expects the stock's relative performance over the next 12 months to be broadly in line with the benchmark, rather than assigning the rating solely based on absolute price appreciation or depreciation.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MGI Tech (688114)

  The report's core coverage company; both domestic and overseas revenue increased, and gross margin and expense control improved, but the company remained in a net loss position.

  Strengths

  Solid domestic market position; overseas revenue growth of 33.8%; gross margin increased to 57.0%; selling, administrative, and R&D expenses all declined YoY.

  Weaknesses

  The 1H26 net loss attributable to shareholders remained CNY158mn, while adjusted net loss was CNY161mn, and the company had yet to achieve overall profitability.

  Comparison

  The rating benchmark is the CSI 300 Index. Neutral indicates that performance over the next 12 months is expected to be broadly in line with the benchmark.

  Risks

  Downside risks include geopolitical risks and dependence on related parties.

Key data

• 1H26 revenueCNY1,366mnUp 18.9% YoY
• Estimated 2Q26 revenueApproximately CNY780mnUp 15% YoY
• 1H26 net loss attributable to shareholdersCNY158mnLoss narrowed 6.4% YoY
• 1H26 adjusted net lossCNY161mnLoss narrowed 20.9% YoY
• China market revenueCNY857mnUp 12.0% YoY in 1H26
• Overseas market revenueCNY483mnUp 33.8% YoY in 1H26, mainly driven by a rebound in growth in the Americas
• Gross margin57.0%Up approximately 3 percentage points YoY, driven by revenue growth and a product mix shift toward reagents
• Operating expensesCNY804mnDown 12.7% YoY
• Selling expensesCNY322mnDown 6.8% YoY
• Administrative expensesCNY204mnDown 13.1% YoY
• R&D expensesCNY277mnDown 18.4% YoY
• Target priceCNY52.46Maintained unchanged; DCF assumptions include a 10.5% WACC and a 4.5% terminal growth rate
• Closing priceCNY74.79As of August 21, 2026

Impact & implications

The report believes that overseas expansion, a higher share of reagents, and expense reductions are improving MGI Tech's operating performance, but the net loss still indicates that revenue growth has not yet fully translated into bottom-line profitability. Based on the persistent losses, the DCF valuation result, and the rating framework relative to the CSI 300, Nomura maintained its Neutral view rather than adopting a more positive rating solely because of revenue growth.

Risks

• Downside risk: Geopolitical factors may impede achievement of the target price.
• Downside risk: The company's dependence on related parties may affect its operations or achievement of the target price.
• Upside risk: Domestic market commercial opportunities exceed the report's expectations.
• Upside risk: Overseas sales perform better than the report's expectations.

What to watch

• Continue to monitor the company's loss-making status.