2Q26 results in line; strong order growth and margin recovery support Buy ratings on A/H shares

Overview

The report reviews Lead Intelligent’s 2Q26 results, focusing on order momentum, demand for energy storage and all-solid-state battery equipment, overseas operations, margin recovery, and progress in new businesses. Goldman Sachs believes quarterly net profit was in line with expectations and that strong orders and an improving business mix should support medium- to long-term earnings growth, and therefore maintains Buy ratings on the A and H shares.

Core views

Lead Intelligent’s 2Q26 revenue, gross profit, EBIT, and net profit were Rmb4.498bn, Rmb1.376bn, Rmb445mn, and Rmb551mn, respectively, representing year-over-year increases of 28%, 18%, 99%, and 47% and sequential increases of 22%, 11%, 7%, and 36%; these were 1%, 10%, and 28% below and 2% above Goldman Sachs’ forecasts, respectively. EPS was Rmb0.33, up 37% year over year and 36% sequentially, and 2% above Goldman Sachs’ forecast. Gross margin, operating margin, and net margin were 31%, 10%, and 12%, respectively, changing by -2, +4, and +2 percentage points year over year and coming in 3 percentage points below, 4 percentage points below, and in line with forecasts, respectively. 1H26 revenue and net profit reached Rmb8.189bn and Rmb956mn, up 24% and 29% year over year, respectively; net operating cash inflow was Rmb4.09bn, up 74% year over year, indicating further improvement in cash collection. The weak gross margin mainly resulted from geopolitical factors that increased ocean freight and raw material costs. The overseas gross margin declined 6 percentage points year over year to 33.7% in 1H26. The company partially offset this pressure through cost reductions and efficiency improvements, with its selling and administrative expense ratio falling to 17.8% in 2Q26, leaving the net margin broadly in line with expectations. Orders are the report’s primary basis for assessing future growth. New orders in 1H26 were approximately Rmb18bn, up 50%-60% year over year, including approximately Rmb9bn in 2Q26, up 38% year over year. Domestic lithium batteries, overseas lithium batteries, and consumer electronics accounted for approximately 60%, 20%, and 10% of orders, respectively. Energy storage battery and power battery orders currently each account for approximately half, with energy storage demand gradually surpassing power battery demand. Management expects FY26 order growth to significantly exceed its initial guidance of 30% year-over-year growth. The pace of order intake thus far in 3Q26 is close to that in 1Q and 2Q, while order visibility extends to August 2027, approximately one year ahead. Supporting factors include capacity utilization exceeding 90% among leading customers and further order concentration among leading customers. Looking ahead to 2027, leading customers are guiding for 30%-50% year-over-year growth in power battery demand and more than 50% growth in energy storage demand. Based on this, the report expects lithium battery equipment orders to continue growing relatively rapidly. All-solid-state battery equipment represents another growth avenue. Management expects all-solid-state battery orders to increase to approximately three times their prior level in 2026. Several overseas customers have announced plans for large-scale vehicle installations in 2027, while some customers are also advancing all-solid-state battery development through humanoid robot applications. Domestically, CATL’s Yibin project and BYD’s Chongqing project made progress in 1H26, targeting the launch of initial scaled production in 2H26. The report therefore believes that, despite the currently small base, progress in the commercialization of all-solid-state batteries is translating into equipment demand. Humanoid robots, solid oxide fuel cells (SOFC), and multilayer ceramic capacitors (MLCC) are viewed as new growth drivers. Lead Intelligent is collaborating with X-Humanoid (Beijing Humanoid Robot Innovation Center) to introduce robots into lithium battery, photovoltaic, and semiconductor industrial applications. Initial orders and related preparations may materialize in 3Q26, after which the business should begin contributing revenue. Core SOFC and MLCC equipment can reuse technology from the company’s existing battery equipment platform and, according to company guidance, offer higher blended gross margins than battery equipment. Both businesses are expected to achieve multifold growth in 2026, although each had an order base of less than Rmb100mn in 2025. Regarding margins, excluding an Rmb41mn foreign-exchange loss, 2Q26 net profit growth would have approached 80% year over year and the net margin would have been close to 15%, indicating that cost reductions and efficiency improvements have already offset some exchange-rate and input-cost pressures. Gross margins began to recover in July and August, and management expects further improvement in 3Q26, with the overseas gross margin returning to above 40%. Overseas revenue rose 111% year over year in 1H26 to Rmb2.44bn, accounting for approximately 30% of total revenue. As the share of overseas revenue increases, management believes the blended gross margin will receive further support and guides for the medium-term net margin to recover to 15%-16%. The medium- to long-term investment thesis is based on joint growth in the core battery equipment business and non-battery businesses. Lead Intelligent has an approximately 25% share of the global intelligent lithium battery equipment market, and Goldman Sachs expects approximately 80% of the company’s business exposure to come from battery capital expenditure. Key drivers include accelerating capacity expansion in energy storage systems, further concentration of the company’s share among leading battery manufacturers, and the long-term potential of sodium-ion and all-solid-state batteries. Goldman Sachs expects energy storage to contribute approximately 40% of battery equipment orders during 2026E-2030E. The remaining approximately 20% of business exposure comes from non-battery areas, where the company is building a second growth engine through businesses such as 3C consumer electronics equipment and humanoid robots. Goldman Sachs forecasts revenue and net profit CAGRs of 28% and 34%, respectively, during 2026E-2030E, with the net margin recovering from lows of 2.7% in 2024 and 10.8% in 2025, caused by the battery industry downturn and deteriorating accounts receivable, to 14.5% in 2030E. Its latest revenue forecasts are Rmb18.5454bn for 2026E, Rmb26.0809bn for 2027E, and Rmb33.0312bn for 2028E; corresponding EPS forecasts are Rmb1.31, Rmb2.03, and Rmb2.82. Based on the quarterly results and margin guidance, Goldman Sachs adjusts its 2026E-2030E net profit forecasts by -2% to 0% and nudges its 12-month target prices for the A/H shares from Rmb50.80/HK$46.30 to Rmb50.90/HK$46.40. The valuations use 2027E P/E multiples of 30x and 24x, respectively. The H-share valuation includes a 20% discount to the A shares, derived from regression analysis of the average trading discount of Chinese industrial stocks. Based on the August 28, 2026 closing prices of Rmb33.44 and HK$30.10, the target upside for the A/H shares is 52.2% and 54.2%, respectively. Goldman Sachs maintains Buy ratings on both share classes.

Analysis framework

The report first compares 2Q26 revenue, profit, and margins with the prior-year period, the previous quarter, and Goldman Sachs’ forecasts, and breaks down the impact of freight costs, raw materials, foreign-exchange losses, and expense efficiency on earnings. It then assesses the sustainability of demand through order size, order mix, customer utilization, and order visibility before evaluating the incremental contribution from all-solid-state batteries and new non-battery businesses. Finally, Goldman Sachs combines company data, its own earnings forecasts, and FactSet pricing data to determine target prices using 2027E P/E multiples and regression-based H/A-share discounts.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  2027E target P/E valuation

  Goldman Sachs estimates share prices by multiplying forecast earnings by target P/E multiples, applying a 2027E P/E of 30x to the A shares and 24x to the H shares to derive 12-month target prices of Rmb50.90 and HK$46.40.

• Quantitative/Factor/Portfolio Theory

  Regression analysis of H/A trading discounts for Chinese industrial stocks

  The report uses a regression relationship based on the average trading discounts of Chinese industrial stocks to apply a 20% valuation discount to Lead Intelligent’s H shares relative to its A shares, rather than directly using the A-share valuation multiple.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Assessing industry demand through customer capacity utilization, capacity expansion needs, and equipment orders

  The report combines utilization rates above 90% among leading customers, power and energy storage battery demand guidance, order growth, and visibility to infer future battery equipment demand and revenue growth.

• Company Fundamentals and Financial FrameworkEarnings Quality Analysis

  Breakdown of margins, cash collection, and one-off foreign-exchange impacts

  The report examines gross margin, expense ratios, net margin, and operating cash flow while excluding an Rmb41mn foreign-exchange loss to assess the true extent of recovery in core profitability and improvement in cash collection.

Asset mapping & comparison

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

• Lead Intelligent A shares (300450.SZ)

  The primary share class explicitly covered by the report; Buy rating maintained with a 12-month target price of Rmb50.90.

  Strengths

  Approximately 25% share of the global intelligent lithium battery equipment market, strong order growth, improving cash collection, and expansion in energy storage and overseas operations.

  Weaknesses

  The 2Q26 gross margin was affected by higher ocean freight and raw material costs, while EBIT was 28% below Goldman Sachs’ forecast.

  Comparison

  Uses a 2027E P/E of 30x as the base valuation; the report believes its target return is above the coverage universe average, while its trading P/E is below the historical average.

  Risks

  A significant decline in EV demand, weaker-than-expected energy storage capacity expansion, or slower development of new non-battery businesses.

• Lead Intelligent H shares (00470.HK)

  The H-share class explicitly covered by the report; Buy rating maintained with a 12-month target price of HK$46.40.

  Strengths

  Shares the company’s battery equipment order, overseas growth, and margin recovery thesis; the report views the H-share valuation and target return as attractive.

  Weaknesses

  Operations are similarly exposed to cost, exchange-rate, and industry-cycle pressures, while the valuation also incorporates a discount to the A shares.

  Comparison

  Uses a 2027E P/E of 24x, a 20% discount to the A-share valuation of 30x, based on regression analysis of trading discounts among Chinese industrial stocks.

  Risks

  Weaker-than-expected demand for EV and energy storage equipment, slower new-business expansion, and the exchange-rate and input-cost pressures described in the report.

Key data

• 2Q26 revenue/gross profit/EBIT/net profitRmb4.498bn/Rmb1.376bn/Rmb445mn/Rmb551mnUp 28%/18%/99%/47% year over year and 22%/11%/7%/36% sequentially, respectively; -1%/-10%/-28%/+2% versus Goldman Sachs’ forecasts.
• 2Q26 EPSRmb0.33Up 37% year over year and 36% sequentially, and 2% above Goldman Sachs’ forecast.
• 2Q26 gross margin/operating margin/net margin31%/10%/12%Changed by -2/+4/+2 percentage points year over year, respectively, and were -3/-4/0 percentage points versus Goldman Sachs’ forecasts.
• 1H26 revenue/net profitRmb8.189bn/Rmb956mnUp 24% and 29% year over year, respectively.
• 1H26 net operating cash inflowRmb4.09bnUp 74% year over year, reflecting further improvement in cash collection.
• 1H26 new ordersApproximately Rmb18bnUp 50%-60% year over year; approximately Rmb9bn in 2Q26, up 38% year over year.
• Order mixDomestic lithium batteries approximately 60%; overseas lithium batteries approximately 20%; consumer electronics approximately 10%Energy storage battery and power battery orders currently each account for approximately half, with energy storage gradually surpassing power batteries.
• Order visibilityExtends to August 2027Approximately one year of visibility; the pace of order intake thus far in 3Q26 is close to that in 1Q and 2Q.
• 2027 customer demand guidancePower batteries up 30%-50%; energy storage up more than 50%Demand guidance from leading customers is an important basis for Goldman Sachs’ expectation of continued growth in lithium battery equipment orders.
• 1H26 overseas revenueRmb2.44bnUp 111% year over year and accounting for approximately 30% of total revenue; the overseas gross margin was 33.7% during the same period, down 6 percentage points year over year.
• Medium-term margin guidanceNet margin of 15%-16%Management expects the overseas gross margin to recover to above 40% in 3Q26.
• All-solid-state battery ordersExpected to increase to approximately three times their prior level in 2026Domestic projects target initial scaled production in 2H26, while some overseas customers plan large-scale vehicle installations in 2027.
• SOFC and MLCC business growthBoth expected to grow multifold in 2026Each had an order base below Rmb100mn in 2025, and the company states that their blended gross margins are higher than those of battery equipment.
• 2026E-2030E revenue/net profit CAGR28%/34%Goldman Sachs expects the net margin to recover from lows of 2.7% in 2024 and 10.8% in 2025 to 14.5% in 2030E.
• 2026E/2027E/2028E revenue forecastsRmb18.5454bn/Rmb26.0809bn/Rmb33.0312bnThe 2025 revenue base was Rmb14.4431bn.
• 2026E/2027E/2028E EPS forecastsRmb1.31/Rmb2.03/Rmb2.822025 EPS was Rmb1.00; the previous 2026E forecast was Rmb1.34.
• Earnings forecast revisions2026E-2030E net profit revised by -2% to 0%Reflecting 2Q26 results and the latest margin guidance.
• A/H-share target prices and upsideRmb50.90/HK$46.40; 52.2%/54.2%Based on 2027E P/E multiples of 30x/24x, with a 20% discount applied to the H shares relative to the A shares.

Impact & implications

The report believes that rapid order growth and approximately one year of visibility reduce uncertainty regarding near-term revenue growth, while rising energy storage demand also helps offset the potential impact of slowing power battery demand. A higher share of overseas revenue, improved expense efficiency, and easing freight and raw material pressures are viewed as the main paths toward recovering gross and net margins. Over the medium to long term, all-solid-state batteries, sodium-ion batteries, and the humanoid robot, SOFC, and MLCC businesses could broaden the company’s sources of growth. Goldman Sachs therefore expects net profit to grow faster than revenue during 2026E-2030E and maintains Buy ratings on the A/H shares, with target upside exceeding 50%.

Risks

• If EV development in China and globally slows significantly further, demand for net additions to power battery capacity will weaken; approximately 50% of the company’s total orders are related to the domestic power battery market.
• If energy storage capacity expansion is weaker than expected, it may not fully offset slowing power battery demand and could disrupt cash collection, revenue, and net profit forecasts due to lower average selling prices and equipment utilization.
• If non-battery businesses such as photovoltaics, consumer electronics, and humanoid robots expand more slowly than expected, the company may remain overly concentrated in battery equipment, pressuring its second growth engine and earnings forecasts.

What to watch

• Monitor whether the overall gross margin continues to recover in 3Q26 and whether the overseas gross margin returns to above 40%.
• Track whether the pace of order intake in 3Q26 and FY26 order growth can significantly exceed the initial guidance of 30% year-over-year growth.
• Observe the actual revenue conversion of orders visible through August 2027, as well as changes in capacity utilization and order concentration among leading customers.
• Monitor whether customer demand guidance for 30%-50% growth in power batteries and more than 50% growth in energy storage in 2027 is achieved.
• Track initial scaled production at domestic all-solid-state battery projects in 2H26 and progress in large-scale vehicle installations by overseas customers in 2027.
• Monitor initial humanoid robot orders in 3Q26, subsequent revenue contributions, and the multifold growth targets for the SOFC and MLCC businesses.
• Observe cash collection, operating cash flow, and margin performance after the Rmb41mn foreign-exchange loss.