Minth Group's first-half results were broadly in line with expectations, with margin resilience offsetting weaker revenue, but slowing automotive demand constrains rerating

Overview

The report reviews Minth Group's 1H26 results and assesses regional and business growth, margins, new businesses, cash flow, global capacity expansion, and valuation prospects. Goldman Sachs believes the results were broadly in line with expectations, with cost control supporting stronger profit performance than revenue performance. However, slowing global automotive demand growth means the company still lacks a clear valuation rerating catalyst, so it maintains a Neutral rating.

Core views

Minth Group announced its 1H26 results after market close on August 25. Relative to Goldman Sachs' forecasts, revenue was 2% lower, gross profit and EBIT were both 2% higher, and net profit was 4% higher. The company still achieved revenue and profit growth amid slowing global automotive production, mainly supported by higher revenue from body structural parts and plastic parts, supplier cost reductions, and customer price negotiations. 1H26 revenue was RMB13.4 billion, up 9% YoY; the report summary stated that revenue declined 0.3% HoH, while the business discussion section recorded 3% HoH growth. Net profit was RMB1.434 billion, up 12% YoY and 1% HoH, with RMB70 million in foreign-exchange gains driving net profit 4% above Goldman Sachs' forecast. Divergent regional performance was the main reason revenue came in slightly below expectations. Revenue in China declined 1% YoY, reflecting weak domestic demand, while revenue in EMEA and the Americas grew 16% and 9% YoY, respectively. European growth was driven by continued increases in new energy vehicle penetration, and management stated that the share of new energy vehicles among its four major European customers—Volkswagen, Renault, BMW, and Mercedes-Benz—is rising. Growth in China and the Americas currently remains slightly behind the company's 2030 revenue mix target of approximately 30% each from China, Europe, and North America. However, the company expects further cooperation with leading Chinese automakers such as BYD and Changan in battery enclosures, and with US automakers such as Ford in body structural parts, to provide catch-up opportunities. By business, revenue from body structural parts increased 26% YoY and plastic parts grew 13%, significantly faster than the 3% growth in metal trim, while aluminum products declined 3%. Body structural parts benefited from European new energy vehicle penetration and demand for battery enclosures. Plastic parts secured new North American projects from customers in the US, Europe, Japan, and South Korea, while Chinese customers increased demand for intelligent exterior trim. Goldman Sachs expects 2026 revenue to reach RMB29.0 billion, up 13% YoY, mainly supported by higher overseas new energy vehicle penetration among core European and US customers and rising battery enclosure revenue from domestic customers such as BYD and Changan. Margins were the main positive factor in the period's results. 1H26 gross margin was 28.6%. The report summary recorded an increase of 0.4 percentage points YoY and 0.9 percentage points HoH, and a result 1.2 percentage points above Goldman Sachs' forecast; a later section recorded increases of 0.3 and 0.8 percentage points YoY and HoH, respectively. The improvement came from material and process optimization, a shift to domestic suppliers, and price-negotiation measures such as locked-in pricing and long-term contracts. The company expects a 23%-25% gross margin for body structural parts in 2H26 because aluminum spot prices, despite peaking in 2Q26, will continue to create cost pressure. It plans to cushion the impact through expense control and maintain double-digit earnings growth. Goldman Sachs expects the overall 2026 gross margin to remain stable YoY at 28.0%, as supplier cost reductions and price negotiations are expected to offset raw material price pressure. EBIT is expected to rise 15% YoY, with the EBIT margin increasing 0.3 percentage points YoY to 12.4%. New businesses are beginning to transition from product development to mass production. The company maintains its 2026 revenue guidance of RMB500 million, RMB300 million, and RMB20 million for robotics, liquid cooling, and eVTOL, respectively, totaling RMB820 million. Combined 1H26 revenue was approximately RMB100 million. Robotics and AI liquid-cooling products began mass production in May and June, so the company expects 2H26 revenue to be significantly higher than in the first half. Robotics products cover humanoid robot structural parts, robotic arm assemblies, joint modules, face masks and head assemblies, flexible sensors, and wireless charging, with face masks having secured orders from a leading US customer. Liquid-cooling products include cooling plate modules, coolant distribution units, and battery backup units, and the company said it has been recognized as a tier-two supplier to Nvidia. In addition, the company is developing connectors and support structures for solid oxide fuel cells, as well as components for eVTOL airframes and rotor systems. The balance sheet and cash flow remained resilient. Net debt declined to RMB4.4 billion in 1H26, below RMB5.7 billion in 2H25 and RMB5.5 billion in 1H25. Accounts receivable turnover days were 107 days, up from 98 days in 2H25 but down from 120 days in 1H25. Accounts payable turnover days were 176 days, above the previous 148 and 95 days, while inventory turnover days were 100 days, above the previous 86 and 95 days. The overall cash conversion cycle shortened, partly due to the extension of accounts payable terms. The total debt-to-equity ratio and total liabilities-to-assets ratio were both 44%, versus 42% and 44%, respectively, in each of the preceding two periods, indicating broadly stable leverage. The company raised its 2026 capital expenditure guidance from no more than RMB2.5 billion to RMB2.5-3.0 billion, above RMB1.9 billion in 2025, mainly for global manufacturing bases and capacity expansion in areas such as battery enclosures. The company already has factories in Alabama in the US, Canada, and Mexico, and plans to expand into Morocco and Poland. Meanwhile, management stated that it would maintain capital expenditure discipline for new businesses such as robotics and AI server liquid cooling. Following the results, Goldman Sachs adjusted its 2026-2028 net profit forecasts by 0% to +2%, as better margins offset lower revenue forecasts. It maintained its 12-month target price of HK$33.5, calculated at 12.0x 2026E P/E and implying 20% upside, as well as its Neutral rating. Minth Group currently trades at approximately 10x 12-month forward P/E, in line with its historical mid-cycle level. Goldman Sachs believes that although the battery enclosure business continues to deliver strong growth, other businesses still face pressure from global automotive demand approaching its peak. It expects automotive demand growth in major markets including China, the US, Europe, and Japan to slow from 6% in 2023-2024 to 1% in 2025-2026 and decline further to -1% in 2027-2028. Accordingly, the company's net profit growth is expected to slow from 24% in 2023-2024 to 13% in 2025-2026 and further to 12% in 2027. Whether the valuation can rerate in the next phase will depend on global automotive demand, new-product execution, and developments in pricing pressure. The main two-way risks are higher- or lower-than-expected automotive production in Europe and the US, stronger- or weaker-than-expected pricing pressure from automaker customers, and faster- or slower-than-expected new-product development.

Analysis framework

Goldman Sachs first compares 1H26 revenue, gross profit, EBIT, and net profit with its own forecasts and with YoY and HoH data, then breaks down revenue variances by region and business and explains gross margin changes through cost optimization, supplier substitution, and customer price negotiations. The report then incorporates the results into its 2026-2028 earnings forecasts, reviews the cash conversion cycle, leverage, and capital expenditure, and determines the target price and rating based on the global automotive demand cycle, the mass-production progress of new businesses, and 2026E P/E.

Methodology notes

• Valuation MethodologyP/E and PEG Valuation

  Target valuation based on 2026E P/E

  The report calculates Minth Group's 12-month target price of HK$33.5 using 12.0x 2026E P/E and compares its current approximately 10x 12-month forward P/E with its historical mid-cycle level.

• Corporate Fundamentals and Financial FrameworkWorking capital cycle

  Cash conversion cycle analysis

  The report compares accounts receivable, accounts payable, and inventory turnover days to assess changes in the time required for the company to convert cash outlays back into cash. The significant extension of accounts payable terms in 1H26 shortened the overall cash conversion cycle.

• Industry Analysis FrameworkSupply and Demand Framework

  Transmission from global automotive demand to auto-parts profitability

  Starting from slowing automotive demand growth in China, the US, Europe, and Japan, the report assesses how vehicle production and customer pricing pressure will flow through to Minth Group's revenue, profit growth, and valuation.

• Industry Analysis FrameworkVolume-price decomposition

  Decomposition of business volume growth and cost and price negotiations

  The report decomposes earnings changes into revenue growth from body structural parts, plastic parts, and battery enclosures, as well as margin changes from material cost optimization, substitution with domestic suppliers, locked-in pricing, and long-term contracts.

Asset mapping & comparison

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

• Minth Group (00425.HK)

  The core company covered by the report, benefiting from European new energy vehicle penetration and volume growth in battery enclosures and plastic parts, while being affected by slowing global automotive demand and customer pricing pressure.

  Strengths

  Body structural parts and plastic parts are growing rapidly, cost optimization has improved gross margin, net debt has declined, and new businesses have begun mass production.

  Weaknesses

  Revenue in China declined, aluminum product revenue is under pressure, global automotive demand growth is slowing, and the gross margin of body structural parts faces aluminum price pressure in 2H26.

  Comparison

  Approximately 10x 12-month forward P/E, in line with its historical mid-cycle level.

  Risks

  Automotive production in Europe and the US, automaker pricing pressure, and new-product development progress may be better or worse than expected.

Key data

• 1H26 RevenueRMB13.4 billionUp 9% YoY and 2% below Goldman Sachs' forecast; different sections of the report record a 0.3% HoH decline and 3% HoH growth, respectively
• 1H26 Gross Margin28.6%1.2 percentage points above Goldman Sachs' forecast; different sections record YoY increases of 0.4 or 0.3 percentage points and HoH increases of 0.9 or 0.8 percentage points, respectively
• 1H26 Net ProfitRMB1.434 billionUp 12% YoY and 1% HoH, and 4% above Goldman Sachs' forecast
• 1H26 Foreign-Exchange GainsRMB70 millionSupported the better-than-expected net profit
• Regional Revenue GrowthChina -1%, EMEA +16%, Americas +9%All figures represent YoY changes in 1H26, with Europe being the main growth region
• Business Revenue GrowthBody structural parts +26%, plastic parts +13%, metal trim +3%, aluminum products -3%All figures represent YoY changes in 1H26
• 2026 Revenue ForecastRMB29.0 billionGoldman Sachs expects 13% YoY growth
• 2026 Gross Margin Forecast28.0%Expected to remain stable YoY
• 2026 EBIT Forecast15% YoY growthEBIT margin is expected to be 12.4%, up 0.3 percentage points YoY
• 2026 Revenue Guidance for New BusinessesRobotics RMB500 million, liquid cooling RMB300 million, eVTOL RMB20 millionRMB820 million in total; combined 1H26 revenue was approximately RMB100 million
• 2H26 Body Structural Parts Gross Margin Guidance23%-25%Rising aluminum prices create pressure
• 1H26 Net DebtRMB4.4 billionBelow RMB5.7 billion in 2H25 and RMB5.5 billion in 1H25
• Working Capital Turnover DaysReceivables 107 days, payables 176 days, inventory 100 daysThe corresponding figures were 98, 148, and 86 days in 2H25 and 120, 95, and 95 days in 1H25
• 1H26 Leverage RatiosTotal debt-to-equity ratio 44%, total liabilities-to-assets ratio 44%Remained broadly stable
• 2026 Capital Expenditure GuidanceRMB2.5-3.0 billionPreviously no more than RMB2.5 billion; actual capital expenditure in 2025 was RMB1.9 billion
• Earnings Forecast Revisions2026E-2028E net profit revised by 0% to +2%Lower revenue forecasts were offset by margin improvement
• Target PriceHK$33.512-month target price based on 12.0x 2026E P/E, implying 20% upside

Impact & implications

The report believes that mass production growth in body structural parts, plastic parts, battery enclosures, and new businesses can support near-term growth, while cost optimization has also improved earnings resilience. However, slowing demand in major automotive markets, aluminum prices, and pricing pressure from automakers may cause profit growth to continue declining. As the current valuation is already close to its historical mid-cycle level, further rerating requires an improvement in global automotive demand or faster-than-expected new-product development.

Risks

• Automotive production in Europe and the US may be higher or lower than expected, affecting orders and revenue.
• Pricing pressure imposed by automaker customers may be stronger or weaker than expected, affecting margins.
• The development and mass-production progress of new products such as robotics, liquid cooling, and eVTOL may be faster or slower than expected.

What to watch

• Monitor automotive production in Europe and the US and demand growth in the major markets of China, the US, Europe, and Japan.
• Monitor whether the gross margin of body structural parts can remain at 23%-25% in 2H26 and whether expense control can safeguard double-digit earnings growth.
• Monitor whether revenue from robotics, AI liquid cooling, and eVTOL can accelerate from approximately RMB100 million in 1H26 toward the full-year guidance of RMB820 million.
• Monitor the volume ramp-up of battery enclosure projects with BYD and Changan and body structural parts cooperation with Ford.
• Monitor RMB2.5-3.0 billion in capital expenditure, overseas factory expansion, and changes in net debt.
• Monitor whether global automotive demand and new-product progress can create the conditions for the next phase of valuation rerating.