Yinghe Technology's LB equipment profitability improved, while vapour business profitability continued to deteriorate, and UBS maintained a Sell rating

Overview

This report is UBS's earnings review of Shenzhen Yinghe Technology (300457.SS). The key conclusion is that in 2025 the company's overall revenue and net profit returned to growth, LB equipment profitability improved significantly, but vapour business profitability continued to deteriorate. While UBS raised its 2026-2028 EPS forecasts and target price, it still maintained a Sell rating.

Core views

The positive factors in the results mainly came from LB equipment: concentrated delivery of higher-margin orders, an upgraded product mix, and segment net margin improvement from -3% in 2024 to 4% in 2025. However, revenue contribution from the vapour business declined and profitability weakened significantly, with the 2025 net margin falling from 40% in 2024 to 22%, and the Q425 estimate dropping further to 12%. Therefore, despite improved prospects for the equipment business, the overall investment view remains cautious.

Analysis framework

The report combines earnings review, segment profitability decomposition, forecast revision, and valuation framework transition. UBS first compares 2025 and Q425 revenue, net profit, gross margin, and net margin performance, then breaks down the revenue mix and net margin changes of LB equipment and the vapour business. It then raises its 2026-2028 EPS forecasts based on the equipment profitability outlook and shifts the valuation framework from SOTP to PE.

Methodology notes

• Valuation methodsPE methodology

  price-to-earnings valuation

  Because the vapour business's revenue share continued to fall, UBS switched its valuation method from SOTP to PE and applied 21x 2026E PE, implying about 0.8x PEG, which it sees as in line with the industry.

• forecastEPS revision

  earnings forecast revision

  After confirming the 2025 results, UBS raised its 2026-2028 EPS forecasts by 3%-24%, mainly reflecting improved profitability expectations for the equipment business.

• rating_definitionForecast Stock Return

  forecast stock return

  In UBS disclosures, FSR is defined as the sum of the expected share price appreciation and dividend yield over the next 12 months, and the equity target price investment horizon is 12 months.

Asset mapping & comparison

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

• 300457.SS

  covered security in the report

  Strengths

  Improved order-delivery quality in LB equipment, upgraded product mix, overseas market expansion, and higher-end product development may lift profitability.

  Weaknesses

  Vapour business profitability has clearly weakened, the related business share in the revenue mix has declined, and overall net margin remains affected by segment volatility.

  Comparison

  UBS switched its valuation from SOTP to 21x 2026E PE, which it says implies 0.8x PEG and is in line with the industry.

  Risks

  Tighter regulation, weaker-than-expected equipment demand, intensified industry competition, and technological lag versus peers.

Key data

• 12-month target priceRmb18.40Up 8% from the previous Rmb17.0.
• RatingSellUBS maintained a Sell rating.
• 2025 revenueabout Rmb9.4bnUp 11% YoY.
• 2025 net profitRmb538mUp 7% YoY.
• Q425 revenue/net profitabout Rmb2.7bn / Rmb236mQ425 revenue grew 6% QoQ.
• Q425 gross margin27%Flat YoY, up 10 percentage points QoQ.
• 2025 revenue mixLB equipment 68%, other 32%The vapour business accounted for about 80% of other revenue.
• LB equipment net margin2025 4%; Q425 estimate 10%Up 7 percentage points from -3% in 2024; up 12 percentage points from -2% in Q325.
• Vapour business net margin2025 22%; Q425 estimate 12%Down 18 percentage points from 40% in 2024; down 15 percentage points from 27% in Q325.
• 2026E EPS revisionraised from 0.71 to 0.87Up 24%, consensus estimate 1.00.
• 2027E EPS revisionraised from 1.06 to 1.10Up 3%, consensus estimate 1.24.
• 2028E EPS revisionraised from 1.14 to 1.28Up 12%.

Impact & implications

For the investment view, improved LB equipment profitability lifts the company's medium-term earnings forecasts and target price, but weaker vapour business profitability erodes overall quality and valuation support. UBS's target price increase mainly comes from better equipment margins rather than a rating upgrade; maintaining a Sell rating indicates it still sees the current valuation or risk-reward profile as unattractive.

Risks

• Tighter regulation of the vapour business may constrain future market growth.
• Weaker NEV sales and downstream capacity expansion than expected could lead to lower-than-expected equipment demand.
• Intensifying competition in the battery equipment industry could significantly compress margins.
• Peers may achieve breakthroughs in technologies such as stacking, while Yinghe Technology fails to keep up in time.
• Upside risks include greater vapour business share in the U.S. market and better-than-expected equipment demand.

What to watch

• 2026 overseas market expansion progress for both LB equipment and the vapour business.
• Whether delivery of higher-margin LB equipment orders and product mix upgrades can continue.
• Whether vapour business net margin remains below expectations.
• NEV sales, downstream battery capacity expansion, and equipment tender demand.
• Competition landscape in battery equipment and changes in technology routes such as stacking.
• Whether the company's actual margins can support UBS's revised 2026-2028 EPS forecasts.