1H26 results slightly exceeded expectations and the new robotics business is progressing as planned; Nomura maintains Buy but lowers its target price

Overview

The report reviews JL Mag's 1H26 results, business mix, gross margin, and progress on its humanoid robotics project. Nomura believes the results slightly exceeded expectations and the new business is progressing as planned, and maintains its Buy rating. However, considering that demand for energy-efficient inverter air conditioners may be weaker than expected and the effective tax rate may rise, it lowers its target price to HKD26.

Core views

JL Mag's 1H26 revenue increased 33% YoY to CNY4.65bn, which Nomura attributed to simultaneous increases in sales volume and average selling prices. 2Q26 revenue was CNY2.61bn, up 49% YoY and 28% QoQ. 1H26 net profit increased 52% YoY to CNY462mn, slightly above the upper end of the company's CNY400-460mn profit alert; 2Q26 net profit was CNY269mn, up 87% YoY and 40% QoQ. The 2Q26 net margin rose to 10.3%, expanding by 2.1 percentage points YoY and 0.8 percentage points QoQ, indicating that revenue growth also translated into stronger profitability. By business segment, 1H26 revenue from new energy vehicles and automotive components increased 33% YoY to CNY2.23bn. The report states that it accounted for 56% of total sales and remained the primary revenue source. Revenue from robotics and industrial motors increased 96% YoY to CNY261mn, accounting for 7% of total sales and becoming the company's third-largest revenue-contributing segment. The business mix's further expansion from traditional new energy applications into robotics and industrial automation is an important basis for the report's assessment of the company's future growth sources. The humanoid robotics business achieved tangible project progress. The company announced that JL Mag had been selected by a key customer as the supplier for a humanoid robot motor rotor project and was preparing for mass production according to the customer's project schedule. Nomura expects the company to initially ship from its domestic factories in the near term; if requested by the customer, localized production could be implemented at its Mexico plant in the future. The report expects the humanoid robotics segment to become a key growth driver for JL Mag in 2028-30F, although this contribution will still depend on the customer's project entering mass production and the pace of industry commercialization. In terms of profitability, the 1H26 gross margin remained at 21%-22%, above management's long-term gross margin guidance of 20%. The 2Q26 gross margin was 21.6%, only slightly lower than 21.8% in 1Q26. Nomura expects the 2H26F gross margin to remain at its current level, based on limited upstream price volatility and the company's continued optimization of its revenue mix. Management also stated that raw material inventory turnover remained stable at approximately one month and that it currently holds no strategic reserves. This inventory strategy reduces the impact of stockpiling, but also makes the speed at which upstream price changes are matched by product price adjustments an important variable for gross margin. Despite the slight outperformance in 1H26, Nomura still modestly lowered its FY26-28F earnings forecasts by 1.5%-3.1%, mainly reflecting potentially weaker-than-expected demand for energy-efficient inverter air conditioners and a higher effective tax rate. The report maintains its Buy rating but lowers its target price from HKD27 to HKD26. The new target price applies an unchanged 25x FY27F P/E to FY27F EPS of CNY0.90; the 25x multiple is consistent with the company's historical 12-month forward trading P/E. The report states that the stock currently trades at 18x FY27F P/E, and the target price implies 50.8% upside from the HKD17.24 closing price on August 21, 2026, with the Hang Seng Index serving as the benchmark. Regarding market data, the company's market capitalization was USD3,024.8mn, its free float was 82.2%, and its three-month average daily trading value was USD10.9mn. In HKD terms, absolute performance over the past one month, three months, and 12 months was +0.8%, -9.8%, and -9.4%, respectively; in USD terms, it was +0.8%, -9.9%, and -9.7%, respectively; relative to the Hang Seng Index, it was -1.4%, -11.0%, and -11.7%, respectively.

Analysis framework

Nomura first assesses whether the 1H26 and 2Q26 results exceeded company guidance by examining revenue, net profit, margins, and YoY and QoQ changes, and then breaks down the sources of growth by business segment. It subsequently evaluates future growth and earnings stability by considering the humanoid robot project nomination, potential shipment routes, gross margin, upstream prices, and the raw material inventory cycle. Finally, it adjusts its FY26-28F earnings forecasts and uses the historical forward P/E as the valuation benchmark for the target price.

Methodology notes

• Valuation methodologyP/E and PEG valuation

  Determining the target price using the historical forward P/E

  The report applies a 25x FY27F P/E to FY27F EPS of CNY0.90 to derive the HKD26 target price. This multiple is consistent with the company's historical 12-month forward trading P/E of 25x and is compared with the current FY27F P/E of 18x.

• Industry analysis frameworkVolume-price decomposition

  Explaining revenue growth through sales volume and average selling prices

  The report attributes the 33% YoY increase in 1H26 revenue to higher sales volume and average selling prices, indicating that growth was not driven solely by either price or volume.

• Company fundamentals and financial frameworkWorking capital cycle

  Raw material inventory turnover analysis

  The report examines the approximately one-month raw material inventory turnover and the practice of holding no strategic reserves to analyze the relationship among upstream price changes, lags in selling price adjustments, and gross margin.

Asset mapping & comparison

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

• JL Mag Rare-Earth Co Ltd (6680.HK)

  The report views it as an important supplier of rare-earth permanent magnet materials benefiting from global electrification, energy efficiency, and robotics trends, and maintains its Buy rating.

  Strengths

  1H26 revenue and profit grew rapidly, while gross margin remained above long-term guidance. Revenue from robotics and industrial motors increased 96% YoY, and the company secured a humanoid robot motor rotor project nomination from a key customer.

  Weaknesses

  Demand for energy-efficient inverter air conditioners may be weaker than expected, and the effective tax rate may rise. The absence of strategic raw material reserves makes gross margin more dependent on the timely matching of upstream prices and selling price adjustments.

  Comparison

  The stock currently trades at 18x FY27F P/E; the target price applies a 25x P/E, consistent with its historical 12-month forward trading level, while performance is benchmarked against the Hang Seng Index.

  Risks

  Weaker-than-expected demand for new energy vehicles, wind power, and energy-efficient inverter air conditioners; upstream price volatility and delayed selling price adjustments; slower-than-expected commercialization of humanoid robots; and further tightening of China's rare-earth export policies.

Key data

• 1H26 revenueCNY4.65bnUp 33% YoY, attributed by the report to higher sales volume and average selling prices.
• 2Q26 revenueCNY2.61bnUp 49% YoY and 28% QoQ.
• 1H26 net profitCNY462mnUp 52% YoY and slightly above the upper end of the CNY400-460mn profit alert.
• 2Q26 net profitCNY269mnUp 87% YoY and 40% QoQ.
• 2Q26 net margin10.3%Expanded by 2.1 percentage points YoY and 0.8 percentage points QoQ.
• 2Q26 gross margin21.6%Compared with 21.8% in 1Q26; remained at 21%-22% overall in 1H26, above the long-term guidance of 20%.
• Revenue from new energy vehicles and automotive componentsCNY2.23bnUp 33% YoY in 1H26 and, according to the report, accounted for 56% of total sales.
• Revenue from robotics and industrial motorsCNY261mnUp 96% YoY in 1H26, accounting for 7% of total sales and becoming the third-largest revenue source.
• Raw material inventory turnoverApproximately one monthManagement stated that turnover remained stable and that it currently holds no strategic reserves.
• FY26-28F earnings forecast revisionsLowered by 1.5%-3.1%Mainly reflecting potentially weaker-than-expected demand for energy-efficient inverter air conditioners and a higher effective tax rate.
• Target price valuation25x FY27F P/EBased on FY27F EPS of CNY0.90 and consistent with the historical 12-month forward trading P/E of 25x.
• Target price and implied upsideHKD26.00; +50.8%Target price lowered from HKD27.00; based on the HKD17.24 closing price on August 21, 2026.
• Market capitalization and liquidityMarket capitalization of USD3,024.8mn; three-month average daily trading value of USD10.9mnThe free float was 82.2%.

Impact & implications

The report believes that growth in the existing new energy vehicle business, improvements in average selling prices, and the rapid expansion of the robotics and industrial motors segment collectively supported the 1H26 results. The humanoid robot rotor project nomination provides a project foundation for potential growth in 2028-30F, while stable upstream prices, revenue mix optimization, and a short inventory cycle should help the 2H26F gross margin remain at its current level. However, weaker assumptions for demand for energy-efficient inverter air conditioners and the tax rate have led to cuts in the earnings forecasts and target price.

Risks

• Demand growth in new energy vehicles, wind power, and energy-efficient inverter air conditioners may be lower than expected.
• Upstream price volatility and lags in average selling price adjustments may cause gross margin fluctuations.
• The commercialization of humanoid robots may progress more slowly than expected.
• China's rare-earth export policies may tighten further.

What to watch

• Monitor the mass-production timetable for the key customer's humanoid robot motor rotor project and near-term shipment progress from domestic factories.
• Monitor whether the customer requests localized production at the Mexico plant.
• Monitor whether the 2H26F gross margin can remain at its current level, as well as changes in upstream prices and the revenue mix.
• Monitor whether the humanoid robotics business can become a key growth driver in 2028-30F as expected in the report.