Q4 2025 results exceeded expectations across the board, with product mix upgrade supporting a target price increase

Overview

This report is UBS's earnings review of Neway Valve (Suzhou). The core conclusion is that the company's Q4 2025 and full-year 2025 results exceeded expectations across the board, with strong performance in revenue, margins, and product mix. UBS believes that the company's premiumization trend is continuing as it expands into forged steel valves, subsea valves, fracturing valves, as well as applications in LNG, FPSO, marine, water, and power.

Core views

UBS reiterates its Buy rating on 603699.SS and raises its 12-month target price from Rmb70.00 to Rmb73.00. The main reasons are: first, Q4 2025 revenue grew 21.4% YoY, net profit grew 48.6% YoY, and gross margin rose to 45.4%; second, 2025 revenue and net profit reached Rmb7.8bn and Rmb1.6bn, respectively, exceeding both UBS and market consensus expectations; third, product mix improvement drove increases in ASP and gross margin, with faster growth in high value-added products such as butterfly valves and forged steel valves; fourth, rising global offshore oil and gas capex, as well as demand from U.S. shale gas, LNG, marine, and the Americas market, may provide additional growth opportunities.

Analysis framework

The report combines earnings breakdown, product mix analysis, regional and downstream demand outlook, management guidance tracking, and DCF valuation. On earnings, it focuses on comparing revenue growth, net profit growth, gross margin, net margin, and changes in EPS forecasts; on the business side, it examines volume growth and certification progress for high-ASP, high-margin products; on valuation, it uses a three-stage DCF method and cross-checks with 2027E P/E and 2025-2028E EPS CAGR.

Methodology notes

• Valuation methodsThree-stage DCF

  DCF target price

  UBS uses a three-stage DCF method to derive the target price, and after incorporating the latest results, raised the target price from Rmb70.00 to Rmb73.00. The report discloses a WACC of 9.1%.

• Rating frameworkForecast Stock Return

  Forecast stock return

  UBS defines FSR as the expected share price appreciation over the next 12 months plus dividend yield; this report discloses projected share price upside of 42.6%, projected dividend yield of 3.1%, and forecast stock return of 45.6%.

• Short-term factor assessmentQuantitative Research Review

  Short-term operations and catalyst scoring

  The report includes UBS's quantitative research review, assigning scores from 1 to 5 for industry structure, regulatory environment, stock fundamental trends, and the probability of EPS surprise versus relative consensus expectations over the next six months, and indicates positive catalysts over the next three months.

Asset mapping & comparison

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

• 603699.SS

  Core coverage target

  Strengths

  Better-than-expected results, higher gross margin, upgraded product mix, growing sales of high-end valves, and strong potential demand from overseas oil and gas and offshore engineering.

  Weaknesses

  Part of the Q4 gross margin improvement was driven by one-off items, and overseas demand and project delivery are cyclical.

  Comparison

  UBS believes both 2025 revenue and net profit exceeded its own and market consensus expectations; the company is currently valued at 16x 2027E PE versus a 2025-2028E EPS CAGR of 23%.

  Risks

  Slower global oil and gas spending, slower gas-fired and nuclear power construction, stronger trade protectionism, project delays, intensifying competition, and delayed order execution.

• Global offshore oil and gas capex

  Demand driver

  Strengths

  High-end products such as subsea valves may benefit from the upcycle in global offshore oil and gas CAPEX.

  Weaknesses

  Capex cycles are affected by oil and gas prices, geopolitics, and customer budgets.

  Comparison

  Compared with traditional valve applications, subsea valves must withstand extreme pressure and long service life requirements, with higher ASP and stronger technical barriers.

  Risks

  Slower oil and gas capex or delayed projects would weaken demand realization.

• LNG, FPSO, marine, water, and power applications

  Growth scenarios

  Strengths

  SKU expansion and increased downstream applications help broaden revenue sources and support product premiumization.

  Weaknesses

  Scaling new applications requires certification, customer onboarding, and project execution cycles.

  Comparison

  The report views these fields as the next leg of growth after traditional oil and gas.

  Risks

  Project cancellations, delivery delays, or intensified export competition from Chinese OEMs.

Key data

• Q4 2025 sales growth21.4% YoYQuarterly sales grew YoY, exceeding expectations.
• Q4 2025 net profit growth48.6% YoYQuarterly net profit increased sharply.
• Q4 2025 gross margin45.4%Higher than Q3's 38.7%, mainly driven by product mix improvement and certain one-off items.
• 2025 revenueRmb7.8bnUp 25% YoY, exceeding UBS and market consensus expectations.
• 2025 net profitRmb1.6bnUp 39% YoY, exceeding UBS and market consensus expectations.
• 2025 gross margin / net margin39.3% / 20.6%Up 1.2 percentage points and 2.1 percentage points YoY, respectively.
• 2025 overall ASP+7% YoYContinued to rise on top of the high base of 39% YoY growth in 2024.
• 2025 sales volume+16% YoYVolume growth together with ASP improvement supported revenue growth.
• Butterfly valve / forged steel valve volume+60% / +54% YoYNewly approved by Saudi Aramco, mainly for more demanding operating conditions, with higher ASP and gross margin.
• 2026 revenue growth guidance20% YoYManagement maintained this guidance despite the Middle East conflict backdrop.
• Q1 2026 revenue forecast+22% YoYUBS forecast.
• Q1 2026E gross marginaround 40%Assuming no one-off revenue items, still driven by product mix improvement.
• 2026-2028E EPS revision+2%-3%UBS raised forecasts after incorporating the results.
• Target priceRmb73.00Raised from the previous Rmb70.00.
• Current priceRmb51.20As of April 17, 2026.

Impact & implications

The report has a positive investment implication for Neway Valve: in the short term, better-than-expected results and strong 2026 growth guidance support upward revisions to earnings forecasts; in the medium term, product premiumization and expansion into more valves for demanding operating conditions are expected to lift ASP and gross margin; in the long term, global offshore oil and gas capex, LNG, FPSO, marine, U.S. shale gas, and expansion in the Americas market may open up greater growth potential. On valuation, the report states that the company is currently trading at 16x 2027E PE, corresponding to a 2025-2028E EPS CAGR of 23%.

Risks

• A slowdown in global oil and gas spending, including slower capex in offshore segments.
• A slowdown in gas-fired and nuclear power construction, possibly due to lower AI capex or the emergence of alternative energy sources.
• Stronger local industrial protection policies in the U.S., EU, Middle East, and other emerging countries.
• Projects being delayed due to further rate hikes or other factors.
• Intensifying export competition from Chinese OEMs in overseas FPSO, LNG, or marine downstream markets.
• Delays or cancellations in existing project execution, which would affect valve deliveries.
• Foreign exchange losses from RMB appreciation may affect profit performance.

What to watch

• Whether the 20% revenue growth guidance for 2026 can be achieved.
• Whether Q1 2026 revenue growth of 22% YoY and the forecast gross margin of around 40% can be delivered.
• Order, certification, and delivery progress for forged steel valves, butterfly valves, subsea valves, and fracturing valves.
• The sustainability of sales growth for high-end products after the relevant Saudi Aramco approvals.
• Emergency replacement valve demand in the Middle East, and whether the company can gain share when European and U.S. peers face capacity constraints.
• Acceleration of new valve demand in regions such as the Americas, Africa, and Southeast Asia.
• Order conversion in new growth scenarios such as LNG, FPSO, marine, water, and power.
• Whether the global offshore oil and gas CAPEX cycle remains strong.