Goldman Sachs maintains Buy on Kstar, focusing on overseas expansion in data center electrical equipment, 800VDC commercialization, and the inflection point in domestic cloud capex

Overview

This report covers China's data center electrical equipment sub-sector and three companies: Shenzhen Kstar Science & Tech, Kehua Data Co., and Megmeet. Goldman Sachs points out that the relevant stocks have corrected significantly recently, and investors are most focused on two main themes in 2H 2026: first, overseas customer expansion and new product launches, including Kstar's new UPS orders and 800VDC module testing, Megmeet's Vera Rubin PSU ramp-up, and Kehua's global certification for power and cooling products; second, whether domestic data center capex will accelerate, particularly whether demand from hyperscale cloud vendors and third-party data centers can offset local pricing pressure.

Core views

The core view is that Kstar offers the most attractive risk-reward, and therefore the Buy rating is maintained; progress in its overseas data center supply chain, UPS capacity utilization, new customer orders, and 800VDC commercialization could ease market concerns about UPS substitution. Kehua benefits from improving domestic data center construction and overseas ESS orders, but fierce competition in domestic data centers and energy storage is pressuring margins, and overseas—especially U.S. market—breakthroughs are slower than Kstar's, so Neutral is maintained. Megmeet is transforming from an industrial automation control company into a global AI server power competitor; opportunities tied to GB200/GB300 and Vera Rubin PSU are prominent, but high valuation, intensifying next-generation 800VDC competition, raw material costs, and customer order visibility still create uncertainty.

Analysis framework

The report uses an analytical framework combining sub-sector outlook, 2Q earnings previews for the companies, tracking of order and product catalysts, segment growth decomposition, and valuation multiples and target price methodology. It focuses on comparing overseas orders, domestic capex, product generation transitions, energy storage demand, margin pressure, R&D and selling investment, and the relative positioning of different companies in the global data center electrical equipment supply chain.

Methodology notes

• Valuation methodsP/E multiple-based target price method

  P/E and discounted target price

  Kstar's target price is based on 2028E P/E of 26x discounted at an 11% cost of equity; Kehua's target price is based on 2027E P/E of 30x; Megmeet's target price is based on 2028E P/E of 32x discounted at an 11% cost of equity.

• Earnings previewSegment revenue and margin forecasting

  Breakdown of sales, gross profit, EBIT, and net profit

  The report breaks down 2Q26 revenue growth, gross margin, and expense pressure by businesses including data center products, energy storage, PV inverters, server power supplies, home appliance controls, and new energy vehicle components.

• Company comparisonGS Factor Profile

  Growth, financial returns, valuation multiples, and composite percentile

  Goldman Sachs uses growth, financial returns, valuation multiples, and composite metrics to compare stocks with the market and industry peers, helping assess relative attractiveness.

Asset mapping & comparison

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

• Shenzhen Kstar Science & Tech (002518.SZ)

  A key company covered in the report, rated Buy

  Strengths

  Strong progress in overseas UPS orders and customer certification; high-power UPS production lines for AI data centers are close to full utilization; 800VDC modules have been launched and are planned for on-site testing with overseas customers; overseas ESS demand comes from regions including Europe, Australia, the Middle East, and Southeast Asia.

  Weaknesses

  2Q26 net profit is dragged by about Rmb20mn in FX losses, PV inverters are affected by weak domestic installations, and the market is concerned that UPS could be replaced by 800VDC over the medium term.

  Comparison

  Compared with Kehua, the report believes Kstar is making better progress in the overseas data center supply chain; compared with Megmeet, Kstar offers a more attractive combination of valuation and earnings growth.

  Risks

  U.S. ODM order growth below expectations, slower-than-expected launch of new products such as 800VDC, and overseas ESS growth and margins below expectations.

• Kehua Data Co. (002335.SZ)

  A key company covered in the report, rated Neutral

  Strengths

  A leader in China's UPS market, benefiting from improved domestic data center construction; it has secured Alibaba modular power distribution and CDU orders, and is making progress in overseas ESS and PCS supply.

  Weaknesses

  2Q26 recurring net profit is below expectations; domestic data center and energy storage product pricing competition is fierce; domestic energy storage and PV inverters drag on growth and margins; overseas, especially in the U.S. data center supply chain, breakthroughs are slower than Kstar's.

  Comparison

  Compared with Kstar, the pace of overseas expansion is slower; compared with Megmeet, Kehua is more of a proxy for domestic hyperscale cloud capex.

  Risks

  The pace of overseas expansion, the strength of domestic cloud capex, and the intensity of pricing competition in domestic data centers and ESS could all create upside or downside risk.

• Megmeet (002851.SZ)

  A key company covered in the report, rated Neutral

  Strengths

  It is transforming into a global AI server power supplier; GB200/GB300-related products already have orders and shipments; ramp-up of Vera Rubin 18.5kW PSU and 110kW power shelf is worth watching; the home appliance control business is supported by a low-base recovery in Indian air-conditioner demand.

  Weaknesses

  The current share price is above the target price; the new energy vehicle components business is weak; rising raw material prices are driving ASP increases across multiple businesses and may suppress domestic demand; the number of 800VDC competitors is increasing and there is still uncertainty around next-generation product validation.

  Comparison

  Compared with Kstar, Megmeet benefits more directly from the NVIDIA ecosystem in AI server PSU, but faces higher valuation and competitive risks; compared with Kehua, Megmeet's growth elasticity depends more on gaining global AI server power share.

  Risks

  AI server PSU share gains slower than expected, ASIC supply chain validation slower than expected, weaker-than-expected mass production execution, a longer 800VDC R&D cycle, and declining sustainability of global AI capex and AIDC supply-demand.

Key data

• Kstar 2Q26 forecastSales Rmb1,561mn, gross profit Rmb468mn, EBIT Rmb203mn, net profit Rmb170mnYoY growth rates are 28%, 34%, 45%, and 20%, respectively; net profit growth is affected by about Rmb20mn in FX losses.
• Kstar target price and ratingBuy; 12-month target price Rmb67.0; current price Rmb33.53; upside 99.8%The target price is unchanged, 2026E net profit forecast is cut by 2%, and 2027-30E is broadly unchanged.
• Kehua 2Q26 forecastSales Rmb2,793mn, gross profit Rmb609mn, EBIT Rmb155mn, net profit Rmb300mnYoY growth rates are 11%, 7%, -9%, and 72%, respectively; reported net profit is boosted by one-off asset disposal gains, while recurring net profit is below expectations.
• Kehua target price and ratingNeutral; 12-month target price Rmb35.0; current price Rmb29.75; upside 17.6%The target price is reduced from Rmb37.24 to Rmb35.0, reflecting domestic energy storage cost pressure and higher SG&A expenses from ESOP.
• Megmeet 2Q26 forecastSales Rmb3,300mn, gross profit Rmb759mn, EBIT Rmb173mn, net profit Rmb140mnYoY growth rates are 40%, 52%, 256%, and 110%, respectively; strong net profit growth mainly comes from a low base, product mix improvement, and better operating leverage.
• Megmeet target price and ratingNeutral; 12-month target price Rmb112.0; current price Rmb136.59; downside 18%2026-30E net profit forecasts are broadly unchanged, with higher home appliance control revenue largely offsetting lower new energy vehicle component revenue.
• Kstar valuation23x/16x 2026E/2027E P/EThe report considers this attractive relative to 56%/43% earnings growth.
• Kehua one-off gainAbout Rmb147mn pre-tax asset disposal gainThis gain boosts 1H26 and 2Q26 reported net profit, but recurring net profit growth is weak.

Impact & implications

In terms of investment implications, the report broadens the sector focus from pure AI data center demand strength to overseas customer certification, order conversion, product architecture transition, and margin sustainability. If Kstar continues to confirm UPS order growth in 2H26 and 2027E and advances small-batch 800VDC orders, it may trigger valuation re-rating; Kehua needs more orders from domestic hyperscale cloud vendors and breakthroughs in overseas certification to unlock upside; Megmeet's valuation needs to be supported by higher AI server PSU share, Vera Rubin-related ramp-up, and progress in 800VDC validation.

Risks

• Intensifying price competition in domestic data center and ESS products may compress gross margins and earnings forecasts.
• If the 800VDC architecture transition happens faster than expected, it may weaken traditional UPS demand and affect the valuations of related companies.
• If overseas customer certification, new orders, and small-batch order conversion are slower than expected, the overseas expansion narrative will weaken.
• FX volatility, RMB appreciation, and raw material cost inflation may drag on net profit.
• Weak domestic PV installations, weak NEV sales, and rising lithium costs for energy storage may drag on related businesses.
• Geopolitical risks, including potential restrictions in Europe and the United States on Chinese inverter or energy storage products, may affect export sustainability.
• Megmeet has investment banking business relationships and shareholding disclosures involving Goldman Sachs, and investors should pay attention to potential conflict-of-interest disclosures.

What to watch

• Kstar's overseas UPS orders, new customer certification, and UPS sales growth confirmed in quarterly results in 2H 2026 and 2027E.
• Progress of Kstar's 800VDC system being sent to overseas customers for on-site testing in 3Q26E and small-batch orders around the end of 2026.
• Tendering, capex, and order momentum of domestic hyperscale cloud vendors and third-party data centers from 2H26E to 2027E.
• Kehua's direct and indirect orders from Tencent, Alibaba, and colocation customers in China and Southeast Asia.
• Certification progress of Kehua's power distribution products and CDU among global customers, especially U.S. customers.
• 2027E growth guidance, margins, and long-term orders for Kstar and Kehua's overseas ESS businesses.
• Megmeet Vera Rubin cabinet ramp-up, share allocation of the 18.5kW PSU and 110kW power shelf, and customer feedback.
• Megmeet 800VDC power rack sample orders, product validation progress, and the competitive landscape.
• Customer acceptance, volume impact, and margin changes across Megmeet's businesses after ASP increases.
• Market validation of future orders and capacity demand following Megmeet's Hong Kong IPO filing.