Maintain Buy rating; cut target price to CNY39

Overview

This report is Nomura’s review of Foryou Corporation’s 1Q26 results. The company maintained healthy YoY revenue growth in 1Q26, but margins remained under pressure from competition in China’s auto industry, annual price cuts, and rising material costs. Nomura believes the company continues to benefit from auto electronics upgrades, higher HUD penetration, AI Box, and expanding demand for precision die casting in automotive and AI-related businesses, so its long-term growth thesis remains intact.

Core views

The core view is that revenue growth takes precedence over short-term margin pressure. Nomura maintains its Buy rating, but due to the latest financial data and changes in the market environment, it lowered its FY26F/FY27F revenue and gross margin forecasts and cut the target price from CNY42 to CNY39. The report believes 1Q26 may mark the margin trough, and as business scale expands, the impact of annual price cuts is absorbed, and material cost pass-through gradually shows through despite a lag, margins are expected to improve sequentially; however, against a backdrop of intense competition, margins may still remain under YoY pressure.

Analysis framework

The report starts from 1Q26 revenue, gross margin, operating margin, and net profit performance, combines demand changes in the two core businesses of auto electronics and precision die casting, revises FY26F/FY27F revenue, gross margin, and earnings forecasts, and compares them with WIND consensus expectations. For valuation, it uses 2026F EPS and a target P/E multiple, while also referencing the historical median P/E, PEG, and the CSI300 benchmark.

Methodology notes

• Valuation methodsP/E multiple valuation

  22x 2026F EPS

  The target price of CNY39 is based on 22x 2026F EPS of CNY1.78; this multiple represents about a 37% discount to the company’s historical median P/E of 35x.

• Valuation methodsPEG cross-check

  1x PEG

  The 22x valuation multiple corresponds to about 1x PEG over 2025-28F, used to match the company’s expected earnings growth.

• Peer and market comparisonComparison with WIND consensus expectations

  Forecast variance comparison

  Nomura’s FY26-28F revenue forecasts are broadly close to WIND consensus, but its FY26-27F earnings forecasts are about 5-6% below consensus, mainly reflecting intensified competition in the auto supply chain.

Asset mapping & comparison

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

• Foryou Corporation / 002906.SS

  Research coverage target

  Strengths

  A participant in the intelligent vehicle supply chain, with auto electronics products covering IVI, LCD dashboards, HUD, streaming rearview mirrors, CDC, wireless charging, CMS, and digital audio systems; the precision die casting business benefits from demand in auto parts, EV power systems, optical modules, and connectors.

  Weaknesses

  Short-term gross margin and operating margin are affected by annual price cuts, rising material costs, and industry competition.

  Comparison

  FY26-28F revenue forecasts are broadly in line with WIND consensus expectations, but FY26-27F earnings forecasts are about 5-6% below consensus.

  Risks

  China’s vehicle upgrade demand is weaker than expected, competition in the domestic intelligent vehicle market intensifies, and new product business development is slower than expected.

• Auto electronics business

  Core business segment

  Strengths

  Benefits from cockpit upgrades, rising HUD penetration, and intelligent vehicle feature upgrades.

  Weaknesses

  Intense competition in China’s auto industry is causing ASP pressure; FY26F/FY27F revenue forecasts were cut by 8.7%/12.7%, and gross margin forecasts were lowered by 2.7/2.8ppt.

  Comparison

  Nomura expects this business to deliver a FY25-28F revenue CAGR of 17%.

  Risks

  Continued price competition, greater customer annual price cuts, and weaker-than-expected demand upgrades.

• Precision die casting business

  Growth business segment

  Strengths

  New orders from automotive-related business, optical modules, connectors, and AI-related demand are driving growth, while the vehicle lightweighting trend provides long-term support.

  Weaknesses

  Rising material costs continue to pressure gross margin, and FY26F/FY27F gross margin forecasts were each lowered by 1.8ppt.

  Comparison

  Nomura raised its FY26F/FY27F revenue forecasts by 22.4%/36.3% and expects a FY25-28F revenue CAGR of 29%.

  Risks

  Raw material price volatility, new order conversion falling short of expectations, and slowing AI-related demand.

Key data

• 1Q26 revenueCNY3.1bnYoY +24%, QoQ -27%.
• 1Q26 gross margin16.5%Down 1.7ppt YoY and 0.7ppt QoQ.
• 1Q26 net profitCNY166mnYoY +7%, QoQ -25%.
• FY25-28F forecast revenue CAGR19%Nomura’s latest forecast.
• FY25-28F forecast earnings CAGR22%Nomura’s latest forecast.
• FY26F EPSCNY1.78Valuation basis for the target price.
• FY26F P/E18xThe report says the company is currently trading at about 18x 2026F P/E.
• Target priceCNY39.00Cut from CNY42.00.
• Closing priceCNY31.77As of April 24, 2026.
• Implied upside+22.8%Based on the target price and closing price.

Impact & implications

The report’s investment implication is positive overall: in the short term, competition and material costs have led to lower gross margin and earnings forecasts, and the target price has been reduced accordingly; in the medium to long term, trends such as vehicle intelligence, HUD penetration, AI-related demand, and auto lightweighting still support revenue and earnings growth, so the Buy rating is maintained. If subsequent sequential margin recovery materializes, valuation pressure may ease; if competition intensifies or new product expansion is slower than expected, there will be risk to achieving the target price.

Risks

• China’s vehicle upgrade demand is weaker than expected.
• Competition in the intelligent vehicle market intensifies further domestically.
• New product business development is slower than expected.
• Rising material costs or a longer-than-expected lag in customer cost pass-through.
• Industry price competition continues to pressure ASP and gross margin.

What to watch

• Whether gross margin improves sequentially from the 1Q26 trough in subsequent quarters.
• ASP and order trends in the auto electronics business amid intensified competition.
• Changes in penetration and customer demand for products such as HUD, AI Box, and CDC.
• Delivery of new orders in the precision die casting business from automotive, optical modules, and connectors.
• Whether the gap between FY26F/FY27F earnings forecasts and WIND consensus narrows or widens.