2Q26 Results In Line; Positive Growth Outlook for 2026-27

Overview

The report reviews iRay Technology Company Limited's 2Q26 and 1H26 results. Quarterly revenue maintained strong growth and overall results were in line with expectations; management remains positive on revenue growth, product expansion, and profitability improvement in 2026-27.

Core views

The report maintains an Overweight rating. The core thesis is that the company has product competitiveness in flat-panel detectors, solutions, and core components, while expanding new growth drivers through OLED backplanes, PCB CT inspection equipment, RGA, and overseas dental operations. Management expects net profit growth in 2027 to potentially exceed revenue growth.

Analysis framework

The report assesses growth momentum using quarterly operating data, management guidance, and performance by product and downstream market, with DCF as the valuation framework.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  Uses a 7.5% WACC and a 4% perpetual growth rate; assumes a 20% CAGR in pre-tax profit for 2026-33.

• Operating analysisSegment and product portfolio analysis

  Revenue growth and gross margin mix

  Assesses growth quality and the impact of product mix on profitability through changes in revenue and gross margins across FPD, solutions, core components, and downstream industrial businesses.

Asset mapping & comparison

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

• 688301.SS

  Directly covered target

  Strengths

  Strong product competitiveness; the industrial business is driven by the battery capital-expenditure cycle and market-share gains, while multiple new businesses provide growth optionality.

  Weaknesses

  2Q26 gross margin declined YoY, making profitability relatively sensitive to changes in product mix.

  Comparison

  Analysts expect its risk-adjusted total return over the next 12-18 months to exceed the average of the industry coverage universe.

  Risks

  Intensifying competition and aggressive pricing, as well as slower-than-expected launches of CT detectors or CT tubes.

Key data

• 2Q26 revenueRmb985mn, +68% YoY and +44% QoQExcluding Seeya's Rmb240mn contribution, +27% YoY.
• 2Q26 net profitRmb227mn, +19% YoYExcluding approximately Rmb80mn of non-recurring expenses including foreign-exchange losses, share-based payments, and debt-to-equity conversion, recurring net profit grew by more than 40% YoY.
• 2Q26 gross margin49%Down 7.3 percentage points YoY, mainly due to product mix.
• 2026 management guidanceRevenue +50%-70% YoY; net profit +25% YoYManagement maintained this guidance unchanged.
• OLED backplane business guidance2026 revenue of Rmb800mnGuidance calls for a 30% gross margin and 10% net margin; Phase II construction is progressing, with revenue growth and margin expansion expected in 2027.
• Target priceRmb140.00Implies 43% upside from the report's stated share price of Rmb97.86.

Impact & implications

In the near term, strong revenue growth and improving recurring profit support management's full-year guidance. In the medium term, OLED backplane capacity expansion, volume ramp-up of PCB CT equipment, photon-counting detector technology upgrades, and overseas business expansion are expected to broaden revenue sources. Gross-margin pressure will still need to be alleviated through product-mix optimization and scale effects.

Risks

• Intensifying market competition and continued aggressive pricing could compress gross margins.
• Launches or commercialization of CT detectors and CT tubes could progress more slowly than expected.
• New business order wins, revenue recognition, and capacity ramp-up could fall short of expectations.
• A weakening capital-expenditure cycle among industrial customers could affect demand.
• Valuation depends on assumptions for long-term growth, capital expenditure, and discount rates; changes in these assumptions could affect the target price.

What to watch

• Delivery against 2026 revenue and net profit guidance.
• PCB CT equipment order wins from 3Q26 and the pace of revenue recognition in 2027.
• Progress of OLED backplane Phase II construction, revenue growth, and margin improvement.
• Technology progress and market adoption of photon-counting detectors.
• Growth performance of industrial business market share, overseas dental operations, and the RGA business.
• The impact of product-mix changes on overall gross margin.