Megmeet (002851) Report Interpretation

Overview

This earnings review assesses Megmeet’s 2Q26 miss against a developing AIDC power-supply opportunity. Goldman Sachs sees the company’s AI-server power products becoming a major longer-term earnings driver, but believes near-term domestic demand and margin headwinds, together with elevated valuation, justify a Neutral rating.

Core views

Megmeet reported 2Q26 sales of Rmb3,273mn, gross profit of Rmb685mn, operating profit of Rmb92mn and net profit of Rmb137mn. These represented year-on-year growth of 39%, 37%, 89% and 107%, respectively, but operating profit was 47% below Goldman Sachs estimates and 53% below Visible Alpha consensus. Sales were 1% below Goldman Sachs estimates and 18% below consensus; gross profit was 10% and 25% below, respectively. Gross, operating and net margins were 21%, 3% and 4%. The power-supplies segment improved, but this was largely offset by weaker profitability in the core businesses. The AIDC power-supply business is the central longer-term growth driver. Power-supplies segment sales rose 59% year-on-year in 1H26 to Rmb1,841mn and 54% in 2Q26 to Rmb1,024mn, with AIDC products driving the increase. Megmeet has begun shipping air-cooled Vera Rubin power supplies and aims to launch liquid-cooled versions in 4Q26E–1Q27E. Management expects meaningful sequential growth in new AIDC orders in 2H26E and rapid growth in 2027E, although quarterly shipments will depend on customers’ data-center construction timing. Goldman Sachs forecasts AIDC power-supply sales of Rmb1.7bn in 2026E and Rmb5.2bn in 2027E, equal to 13% and 29% of total sales and 20% and 41% of total gross profit, respectively. The report attributes the power-supplies segment’s 3 percentage-point year-on-year and half-on-half gross-margin improvement in 1H26 to higher-margin leading-edge products. The report sees further product and customer expansion, but also execution and competitive considerations. Beyond AC/DC power supplies and power shelves, Megmeet is sampling products including capacitor-backup-unit shelves, voltage compensators, power bricks and battery-backup-unit shelves. It is working with multiple US cloud service providers on ASIC projects, where server power requirements are generally around 5.5kW. The company is also co-developing with Chinese cloud service providers and has validation from most domestic server ODMs/OEMs; management expects roughly 20% of AIDC orders in 2H26E–2027E from China and 80% overseas. However, the company notes increasing overseas AIDC competition, while Goldman Sachs identifies a high-efficiency product gap versus tier-one peers such as Delta Electronics. Management is developing 800 VDC products, including power racks or sidecars, 800V-to-50VDC power shelves and DC-DC power bricks, but does not expect industry-wide mainstream adoption in 2027E because safety regulations are lacking. It plans to launch a solid-state transformer in 1H27E, while management expects broader SST adoption only from 2029E onward. Goldman Sachs therefore treats faster GPU/ASIC order wins and faster 800V validation as potential upside drivers rather than near-term base-case contributors. Core businesses remain the near-term drag. Home-appliance sales grew 19% in 1H26 and 40% in 2Q26, helped by normalized overseas demand, especially in India, but China demand remained muted amid property-market weakness. NEV and rail-component sales growth slowed to 11% in 1H26 and 9% in 2Q26, versus 109% in 2025 and 13% in 1Q26, amid domestic EV-demand contraction and the company’s withdrawal from many low-margin projects. Industrial-automation sales growth slowed to 15% in 1H26 and 13% in 2Q26, from 40% in 2025 and 19% in 1Q26. In 1H26, gross margins declined by 4 percentage points in home appliances, 1 percentage point in NEV and rail components, and 1 percentage point in industrial automation, reaching 18%, 13% and 28%, respectively. Raw-material inflation, weak domestic macro conditions and RMB appreciation were cited as causes. A June broad-based ASP increase met less resistance overseas than domestically, particularly in EVs; management sees a higher overseas mix as an important mitigation, potentially reaching 50%–60% in 2027E from 43% in 1H26. Goldman Sachs forecasts 16% year-on-year core-business sales growth in 2H26E and combined gross margins of 22% and 21% in 2026E and 2027E. Cash generation and investment needs are also relevant. Operating cash flow fell to Rmb30mn in 1H26 from Rmb192mn in 1H25, while capex increased 9% year-on-year to Rmb190mn as Megmeet expanded capacity in China and Thailand and invested in AIDC and core-business R&D and testing. The company indicated that most planned proceeds from its proposed Hong Kong IPO, announced in June 2026, would support AIDC-product capacity expansion to improve production reliability and agility. Goldman Sachs cuts 2026E and 2027E net-income forecasts by 10% and 6%, respectively, because domestic weakness and gross-margin headwinds outweigh the initial AIDC ramp. It raises 2028E–2030E net-income forecasts by an average of 11% as AIDC scale is expected to generate operating leverage. The 12-month target price increases to Rmb120.0 from Rmb112.0, based on 32x 2028E P/E discounted back to 2027E using an 11% cost of equity. The report nevertheless maintains Neutral: the stock traded at 128x 2026E and 54x 2027E P/E, compared with the China Industrial Tech coverage median of 26x and 23x, respectively.

Analysis framework

Goldman Sachs first compares 2Q26 revenue, profit and margins with its estimates and Visible Alpha consensus, then separates the AIDC power-supply ramp from the core-business demand and margin trends. It translates management commentary on products, customers, orders and industry adoption into sales and earnings forecasts, and values the company using a forward P/E multiple discounted back with an 11% cost of equity.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Forward P/E valuation discounted back to 2027E

  The report sets its Rmb120.0 12-month target price using 32x 2028E P/E, then discounts that value back to 2027E using an 11% cost of equity.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  AIDC power-supply demand is assessed through customer data-center construction, NVIDIA and ASIC supply chains, and product validation.

  The report links Megmeet’s prospective shipments and sales to cloud customers’ build-out cadence, GPU and ASIC project wins, and the timing of product validation.

• Industry AnalysisVolume-price decomposition

  Segment growth and gross margins are evaluated alongside ASP increases and mix shifts.

  The report distinguishes revenue expansion from pricing pass-through and margin effects, including the contribution of higher-margin AIDC products and the challenge of raising domestic ASPs.

Asset mapping & comparison

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

• Megmeet (002851.SZ)

  Primary covered company; AIDC power-supply expansion is expected to drive longer-term growth, while core businesses face near-term demand and margin pressure.

  Strengths

  Vera Rubin shipments have begun; volume orders for 5.5kW GB200/GB300 PSUs support the AIDC ramp; leading-edge power products carry higher margins.

  Weaknesses

  Core-business gross margins are under pressure, domestic demand is weak, and the company has a high-efficiency product gap versus tier-one peers.

  Comparison

  The report cites Delta Electronics as a tier-one peer with a stronger high-efficiency product portfolio; Megmeet trades above the China Industrial Tech coverage median on 2026E/2027E P/E.

  Risks

  AI-server PSU share gains, ASIC validation, mass-production execution, 800VDC R&D and adoption, and AI capex and AIDC supply-demand dynamics.

• NVIDIA

  Ecosystem linkage for Megmeet’s GB200/GB300 and Vera Rubin power-supply products.

  Strengths

  Megmeet’s entry into the NVIDIA MGX ecosystem validates its R&D capabilities.

  Risks

  The pace of Megmeet’s market-share gains within the NVIDIA ecosystem is an explicit upside/downside risk.

Key data

• 2Q26 revenueRmb3,273mn+39% year-on-year; 1% below Goldman Sachs estimates and 18% below Visible Alpha consensus.
• 2Q26 operating profitRmb92mn+89% year-on-year; 47% below Goldman Sachs estimates and 53% below Visible Alpha consensus.
• 2Q26 marginsGPM 21%; OPM 3%; NPM 4%GPM and OPM were each 2 percentage points below Visible Alpha consensus.
• AIDC power-supply sales forecastRmb1.7bn in 2026E; Rmb5.2bn in 2027EExpected to represent 13%/29% of total sales and 20%/41% of total gross profit.
• Net-income forecast revisions-10% for 2026E; -6% for 2027E; +11% on average for 2028E–2030ENear-term cuts reflect core-business weakness and margin pressure; later increases reflect AIDC scale and operating leverage.
• Operating cash flowRmb30mn in 1H26Down from Rmb192mn in 1H25.
• Target price and valuationRmb120.0 target price; 128x 2026E P/E and 54x 2027E P/ETarget is up from Rmb112.0; reported multiples exceed the 26x/23x China Industrial Tech coverage median.

Impact & implications

Goldman Sachs views AIDC power supplies as a structural transition that could materially increase Megmeet’s revenue mix, gross-profit contribution and operating leverage from 2027 onward. In the nearer term, weak domestic end-markets, limited domestic ASP pass-through and margin pressure in legacy segments constrain earnings, while the current valuation leaves the report with a balanced risk-reward assessment.

Risks

• Faster or slower AI-server PSU market-share gains within the NVIDIA ecosystem could change the outlook.
• Faster or slower product validation with ASIC hardware supply chains could affect growth.
• Mass-production execution could be better or worse than expected.
• 800VDC power-product R&D cycles and industry adoption could be faster or slower than expected.
• The sustainability of global AI capex growth and AIDC supply-demand dynamics remains a key risk.

What to watch

• Sequential growth in new AIDC power-supply orders in 2H26E and the Vera Rubin product ramp.
• Timing of liquid-cooled Vera Rubin product launch, targeted for 4Q26E–1Q27E.
• Customer data-center construction progress and its effect on quarterly AIDC shipments.
• Mass-production yields and R&D progress for next-generation 800VDC and solid-state-transformer products.
• Domestic demand, ASP pass-through, overseas mix and gross-margin trends in the core businesses.