Bear Electric's 2Q26 results missed expectations, with weak domestic demand and operating deleveraging weighing on profit
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Bear Electric's 2Q26 results missed expectations, with weak domestic demand and operating deleveraging weighing on profit
Goldman Sachs cuts its 2026E-2028E EPS forecasts by 12%-19%, lowers its 12-month target price from Rmb42 to Rmb36, and maintains its Neutral rating.
- 1H26 revenue was Rmb2,349mn, down 7% year on year; net profit was Rmb120mn, down 41% year on year.
- 2Q26 revenue and net profit declined 9% and 46% year on year, respectively, below Goldman Sachs' expectations.
- Domestic sales declined 9% year on year in 1H26; overseas business maintained positive growth, although growth slowed from the prior period.
- 2Q26 gross margin declined 0.6 percentage points year on year to 37.0%, while net margin declined 2.5 percentage points to 3.7%.
- The target price is based on a 17x exit P/E multiple applied to average 2026E-2027E EPS.
Report interpretation
Overview
Bear Electric reported 2Q26 results below expectations. Weaker demand led to a sharper revenue decline, while operating deleveraging and non-recurring factors such as foreign-exchange losses further weighed on net margin. Goldman Sachs believes the company will continue to face demand pressure, cost pressure, and intense competition in the near term, and therefore maintains its Neutral rating.
Core views
The company has differentiated advantages in long-tail categories, online and livestreaming channel positioning, product innovation, and category expansion. Growth in overseas markets, particularly mother and baby products, and higher gross margins also provide support. However, the current domestic demand recovery remains weak, while the proportion of low-margin overseas revenue, cost inflation, and expense efficiency all pressure profitability; its valuation premium versus peers has also priced in some positive factors.
Analysis framework
The report combines quarterly results with the management earnings call to break down changes in products, regions, channels, and margins, and accordingly adjusts earnings forecasts and valuation assumptions.
Methodology notes
The 12-month target price is estimated by applying a 17x exit P/E multiple to average 2026E-2027E EPS.
Given the slower growth outlook, the exit multiple is reduced from 18x to 17x, and the target price is lowered from Rmb42 to Rmb36.
Growth, financial returns, valuation, and composite metrics are compared against the market and industry peers.
Growth, financial return, and valuation-related metrics are converted into percentiles after standardized ranking, while the composite metric incorporates the impact of lower valuation.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- 002959.SZCommon equity of the covered company
- Strengths
- Diversified product portfolio, strong innovation capability, and potential for category expansion and market share gains; flexible positioning in online and livestreaming channels; continued overseas expansion, with fast growth and higher gross margins in mother and baby products.
- Weaknesses
- Weak domestic demand pressures revenue; operating deleveraging and non-recurring items weigh on net margin; a higher mix of low-margin overseas revenue pressures gross margin.
- Comparison
- The company is differentiated in long-tail products and online channel positioning, but its valuation premium relative to peers has already reflected some positive expectations.
- Risks
- Demand recovery below expectations, intensifying competition, higher raw material costs, or unsuccessful channel expansion or new product launches.
Key data
- 1H26 revenueRmb2,349mn, -7% YoYWeak domestic demand weighed on revenue performance.
- 1H26 net profitRmb120mn, -41% YoYThe decline in earnings was greater than that in revenue.
- 2Q26 revenue YoY growth-9%Further weakened from -6% in 1Q.
- 2Q26 net profit YoY growth-46%Below Goldman Sachs' expectations.
- 2Q26 gross margin37.0%, -0.6 percentage points YoYAffected by cost inflation and a higher mix of low-margin overseas revenue, partly offset by product mix improvement.
- 2Q26 net margin3.7%, -2.5 percentage points YoYWeighed down by operating deleveraging and factors including foreign-exchange losses.
- Earnings forecast revision2026E-2028E EPS cut by 12%-19%Reflects the latest results and demand environment.
- 12-month target priceRmb36Based on a 17x exit P/E multiple applied to average 2026E-2027E EPS.
Impact & implications
The near-term investment case depends on the pace of domestic demand improvement, expense efficiency, and recovery in overseas profitability. Management expects a modest recovery in domestic demand in the second half from a low base and aims to improve profits through product mix optimization, cost reduction, and better returns on expense investment. Overseas profitability is expected to improve through customer and cost adjustments, as well as more controllable foreign-exchange effects.
Risks
- Demand recovery is weaker than expected.
- Industry competition intensifies further.
- Raw material costs increase.
- Channel expansion or new product launches fall short of expectations.
- Foreign-exchange fluctuations adversely affect overseas business profitability.
What to watch
- The extent of domestic demand recovery in the second half from a low base.
- Sales trends and channel mix changes across channels such as Pinduoduo and JD.com.
- Overseas business growth, as well as profitability improvement after customer and cost adjustments.
- Progress in product mix optimization, cost reduction measures, and returns on expense investment.
- The effects of raw material costs and foreign exchange on gross margin and net margin.