Maintain Neutral, lower target price; 1Q26 deliveries again below expectations, commercialization still awaits regulatory catalysts

Overview

This report is J.P. Morgan's 1Q26 earnings review of EHang ADR. The report notes that 1Q26 revenue was about Rmb25.7mn and EH216 series deliveries were only 4 units, showing that commercialization of passenger-carrying eVTOL remains slower than expected. Even so, EHang remains one of the few autonomous passenger-carrying eVTOL companies globally to have obtained TC, PC, AC, and operator OC, and its long-term optionality remains intact. The report maintains a Neutral rating but lowers the Mar-27 target price to US$9.70.

Core views

The core judgment is that short-term earnings and revenue quality are weak. The market should not interpret the low 1Q26 deliveries simply as disappearing demand, but it should acknowledge that commercialization rollout is slower, regulatory requirements are more detailed, and customer procurement relies more on operational validation after public ticket sales begin. J.P. Morgan therefore lowers its FY26-28 delivery, revenue, and earnings forecasts, and believes the current share price already fairly reflects the long-term story. Going forward, clearer catalysts are needed, such as approved routes, public ticket sales, operator training, overseas contracts, or commercialization progress in Thailand.

Analysis framework

The report uses 1Q26 financial data, delivery performance, management earnings-call Q&A, commercialization regulatory progress, overseas market expansion, non-passenger business contribution, and valuation multiples as its main analytical threads; at the same time, it reassesses the FY26-28 delivery, revenue, and profit path based on more conservative assumptions for post-audit revenue recognition.

Methodology notes

• Valuation methodsFY26-27E average P/S multiple method

  8.0x FY26-27E average P/S

  The Mar-27 target price of US$9.70 is based on 8.0x FY26-27E average P/S, referencing the average trading multiple of autonomous-driving hardware suppliers in the four years before broad adoption, as a historical proxy for early-stage, safety-critical mobility technologies.

• Earnings revisionDelivery and revenue forecast cuts

  Commercialization slowdown assumption

  J.P. Morgan lowered its FY26/FY27/FY28 delivery forecasts from 230/315/378 units to 196/245/294 units, and reduced revenue forecasts to reflect a slower deployment pace and more prudent revenue recognition.

• Commercialization assessmentCertification-to-operations conversion framework

  From TC, PC, AC, and OC to public ticket sales

  The report distinguishes aircraft airworthiness certification from commercial operating approval, and believes the current bottleneck has shifted from certification to regulators' final confirmation of trial operations, operating standards, public ticket sales, and a replicable operating model.

• Revenue qualityBusiness mix and prudence in revenue recognition

  Non-passenger revenue share and FY25 audit adjustment

  Non-passenger businesses such as aerial media contributed about 40% of 1Q26 revenue, improving diversification but weakening the commercialization signal of passenger-carrying eVTOL; meanwhile, the roughly Rmb90mn FY25 revenue recognition adjustment led future forecasts to adopt more conservative assumptions.

Asset mapping & comparison

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

• EHANG HOLDINGS LTD ADR (EH.O)

  Covered company and core equity target

  Strengths

  Has first-mover certification advantages including TC, PC, AC, and operator OC; product portfolio covers passenger-carrying eVTOL, aerial media, firefighting, logistics, and command-and-control systems; participation in overseas projects is increasing.

  Weaknesses

  1Q26 deliveries were only 4 units, passenger-carrying eVTOL commercialization revenue contribution remains limited, operating expense ratio is high, Non-GAAP net loss widened, and FY26-28 forecasts were revised downward.

  Comparison

  J.P. Morgan believes EHang remains the global leader in autonomous passenger-carrying eVTOL certification, but the deployment ramp implied by market consensus remains too optimistic.

  Risks

  Delayed regulatory approvals, failure to launch public ticket sales, insufficient customer demand conversion, more conservative revenue recognition, and overseas projects still remaining at the demonstration stage.

• EH216-S

  Core passenger-carrying eVTOL commercialization product

  Strengths

  Operators in Hefei and Guangzhou have completed more than 3,000 cumulative flights with zero accidents and zero violations, and ticketing systems, customer service systems, complaint handling, and operating SOPs have been established.

  Weaknesses

  Still requires final regulatory approval before public ticket sales can begin, and customers' willingness to procure at scale depends on validation of economics after formal commercial operations start.

  Comparison

  The report says EH216-S remains one of the eVTOL platforms closest to scaled commercial operations globally, but the actual delivery pace is clearly slower than market expectations.

  Risks

  Additional CAAC requirements for trial operations and operating standards may continue to increase, while utilization in high-temperature environments, operator training, and route approvals may affect the ramp.

• Non-passenger business

  Source of revenue diversification and transitional growth

  Strengths

  Aerial media, firefighting eVTOL, logistics drones, and command-and-control systems can reduce dependence on the regulatory timing of passenger flights, and already contributed about 40% of revenue in 1Q26.

  Weaknesses

  Although business diversification supports revenue, it also highlights that passenger-carrying eVTOL commercialization has not yet formed a meaningful contribution.

  Comparison

  Aerial media gross margin is about 50%, firefighting eVTOL gross margin is slightly higher than EH216-S, and overall gross margin is expected to remain above 60% under the planned business mix.

  Risks

  Volatility in project-based revenue, government procurement timing, execution costs of drone performance services, and validation progress in firefighting and logistics applications may all affect sustainability.

Key data

• RatingNeutralRating maintained unchanged.
• Target priceUS$9.70Mar-27 target price lowered from US$11.00.
• Current share priceUS$8.71Price date is June 8, 2026.
• 1Q26 revenueRmb25.7mnRoughly flat year over year, but down significantly quarter over quarter due to fewer aircraft deliveries.
• 1Q26 EH216 series deliveries4 unitsBelow 11 units in 1Q25 and 66 units in 4Q25, the lowest quarterly level since 3Q22.
• FY26/FY27/FY28 delivery forecast196/245/294 unitsPrevious forecast was 230/315/378 units.
• FY26/FY27/FY28 revenue forecastRmb521mn/Rmb689mn/Rmb865mnPrevious forecast was Rmb531mn/Rmb759mn/Rmb954mn.
• FY26/FY27/FY28 net profit forecastRmb-96mn/Rmb+23mn/Rmb+258mnPrevious forecast was Rmb+31mn/Rmb+124mn/Rmb+261mn.
• 1Q26 Non-GAAP gross margin62.5%Compared with 62.0% in 1Q25 and 61.6% in 4Q25.
• 1Q26 Non-GAAP operating expensesRmb101.1mnAbout 394% of revenue, affected by commercialization preparation, VT35 development, marketing, and depreciation.
• 1Q26 Non-GAAP net lossRmb75.6mnLoss widened from Rmb31mn in 1Q25; 4Q25 had a profit of Rmb26mn.
• Management FY26 revenue guidanceRmb600mnManagement expects most revenue to be recognized in 2H26.
• FY26 revenue mix guidanceEH216-S and VT35 about 60%, non-passenger business about 40%Management expects more than 50% of revenue to come from newly developed customers.
• Expected overseas revenue contributionMore than 10% of FY26 revenueCommercialization progress in Thailand is a key variable.
• Hefei experience ticket priceRmb299Management reiterated the previously disclosed experience ticket pricing framework.
• Cumulative flights after obtaining OCMore than 3,000 timesOperators in Hefei and Guangzhou maintained zero accidents and zero violations.
• Aerial media 1Q26 contributionAbout 40% of revenueDelivered 1,000 GD4.0 swarm drones during the quarter and completed 22 aerial media projects.
• Aerial media FY26 revenue expectationMore than Rmb100mnRevenue comes from drone sales and performance services.
• Firefighting eVTOL selling priceAbout Rmb3.45mn/unitManagement said current gross margin is slightly higher than EH216-S.
• Cash and cash-equivalent assetsAbout Rmb1.03bnIncluding cash, restricted cash, short-term deposits, investments, and wealth management products.
• ADS repurchase planUS$30mnApproved by the board, with an authorization period of 12 months.
• FY25 revenue recognition adjustmentAbout Rmb90mnManagement said about 70% of the related receivables have been collected, and revenue will be gradually recognized as cash is received.

Impact & implications

In terms of investment implications, the report repositions EHang from a high-expectation commercialization acceleration story to a long-term optionality play awaiting validation from regulation and operating data. If public ticket sales, commercialization in Thailand, operator training, and overseas orders materialize, the stock could be re-rated; if regulatory approvals continue to be delayed, deliveries remain weak, or revenue recognition issues recur, the market may continue to depress near- to medium-term revenue and earnings assumptions.

Risks

• Further delays in domestic public ticket sales and formal commercial operating approvals, causing deliveries and revenue recognition to shift later.
• Customers may remain on the sidelines before formal commercialization; if passenger traffic or operating economics fall short of expectations after public ticket sales begin, demand conversion may be weaker than management expects.
• The FY25 revenue recognition adjustment shows uncertainty in new customer credit quality and collection timing, and FY26 may still see cross-period revenue recognition.
• Operating expense ratio is high and Non-GAAP losses have widened; if the revenue ramp is insufficient, the profitability path may continue to shift later.
• Overseas markets are still mainly at the demonstration, validation, and regulatory communication stage, and the uncertainty of commercial orders in Thailand, Mexico, and other regions remains high.
• Safety incidents, operating violations, or technical reliability issues could materially affect the regulatory timeline and user acceptance.
• Although non-passenger businesses can diversify risk, if project-based revenue proves unsustainable, revenue quality and valuation support may come under pressure.

What to watch

• The final timing of CAAC approval for EH216-S public ticket sales and formal commercial operations.
• Route expansion, daily flight volume, load factor, and ticket price execution at operators in Hefei, Guangzhou, and other locations.
• Completion of internal instructor training after late June 2026, and formal operator training progress in the next quarter.
• Whether deliveries and revenue recognition in 2H26 can support management's Rmb600mn guidance.
• Whether Thailand can launch formal commercial operations before the ICAO Advanced Air Mobility meeting in Bangkok.
• Progress on overseas certification mutual recognition, projects in Thailand and Mexico, and contracts in Japan, South Korea, Spain, and the Middle East.
• Whether aerial media revenue reaches the FY26 target of more than Rmb100mn, and whether gross margin in non-passenger businesses remains stable.
• Subsequent collections and revenue recognition timing for receivables related to the FY25 revenue recognition adjustment.
• Execution of the US$30mn ADS repurchase and whether the cash balance is sufficient to cover R&D, commercialization, and the buyback.