2Q26 Results Broadly In Line; New Energy and Semiconductor Customer Mix Optimization Remains the Core Catalyst

Overview

Milkyway reported 2Q26 results, with strong revenue growth and YoY growth across all business segments. Revenue was supported by new energy exports, recovery in the chemical industry, and higher volumes from major customers; profits were affected by a higher contribution from low-margin major customers, rising raw material costs, ramp-up of new warehouses, and FX losses.

Core views

The report believes the company's medium- to long-term investment thesis remains intact: its integrated chemical logistics and distribution capabilities, warehouse assets, industry experience, and customer relationships form competitive barriers. The near-term investment focus is whether greater resource allocation to high-margin customers such as those in new energy and semiconductors can drive revenue acceleration in 2H and a recovery in warehouse margins.

Analysis framework

The fundamental assessment combines quarterly revenue, segment growth, gross margin, operating cash flow, leverage changes, and customer mix, while valuation is based on a discounted forward EV/EBITDA exit multiple.

Methodology notes

• Valuation methodsEV/EBITDA Exit Multiple Method

  Valuation based on 2028E EV/EBITDA and discounted

  The target price is based on 10.0x 2028E EV/EBITDA, discounted to mid-2027 using a 9.8% WACC. The exit multiple references the 10-year mid-cycle average of global comparable companies.

• Operating AnalysisCustomer Mix and Segment Profitability Analysis

  Assessing mix upgrades through revenue and gross profit contribution

  The analysis focuses on the impact of new energy and semiconductor customers on revenue, gross profit, and warehouse resource allocation, while tracking the recovery of traditional chemical businesses.

Asset mapping & comparison

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

• Milkyway（603713.SS）

  Covered Company

  Strengths

  A leading Chinese specialist third-party chemical logistics and distribution service provider, with integrated service capabilities, chemical industry expertise, supplier relationships, strategic warehouse assets, technology-enabled operations, and a track record of M&A execution; its new energy and semiconductor businesses have relatively strong profitability.

  Weaknesses

  Traditional businesses and volume growth from major customers may reduce overall gross margin; new warehouse construction faces initial ramp-up pressure; debt levels remain relatively high.

  Comparison

  Third-party penetration in China's chemical logistics and distribution market remains below that of mature markets, and the report sees significant room for improvement.

  Risks

  Slower-than-expected recovery in chemical demand, a slowdown in outsourcing trends, lower freight-forwarding unit prices due to declining logistics costs, hazardous chemical handling incidents, weaker-than-expected chemical distribution development, and value-dilutive acquisitions.

Key data

• 2Q26 RevenueRmb4.23bn, up 14% YoY6% above Goldman Sachs' expectations.
• 2Q26 Net ProfitRmb197mn, up 10% YoYA record high, approximately 1% below expectations.
• 2Q26 Gross Margin10.6%Down 0.7 percentage points YoY and 1.1 percentage points below expectations.
• 2Q26 EBITRmb319mn, up 11% YoY5% above expectations, supported by lower-than-expected expenses.
• 2Q26 Free Cash FlowRmb187mnOperating cash flow was Rmb250mn, while capex fell to Rmb62mn.
• New Energy and Semiconductor CustomersContributed 21% of revenue and 29% of gross profit in 1H26Reflecting profitability above that of traditional businesses.
• Semiconductor Revenue ContributionExceeded 6% in 1H26Above less than 5% in 2H25; the company plans to reallocate approximately 10% of warehouse resources from chemical customers to semiconductor customers.
• Full-Year Net Profit Guidance15% YoY growthManagement reiterated its guidance and indicated that its internal target is higher.

Impact & implications

Revenue growth and the upgrading mix of emerging customers support maintaining a positive rating, but the pace of gross margin improvement will determine earnings delivery. Full conversion of the convertible bonds in August helps reduce leverage, but dilutes EPS due to a higher share count; the report therefore lowers EPS forecasts by 6%-8%.

Risks

• China's chemical industry sales growth falls below expectations.
• The outsourcing trend among chemical producers reverses or slows.
• Lower logistics cost inputs reduce ASPs in the global freight-forwarding business.
• Improper handling of hazardous chemicals leads to safety incidents.
• Chemical distribution business development is slower than expected.
• Acquisitions fail to create value.
• Widening FX losses, rising raw material costs, and an extended ramp-up period for new warehouses may continue to pressure margins.

What to watch

• Whether gross margin in the warehousing business improves meaningfully in 3Q26 as management expects.
• Whether new energy export orders and the chemical industry recovery can continue.
• Incremental contribution from new semiconductor customer orders in 2H26 and progress in warehouse resource reallocation.
• The impact of low-margin major customer mix and raw material costs on overall gross margin.
• The actual impact of lower leverage and EPS dilution following convertible bond conversion.
• Progress toward achieving full-year guidance for 15% YoY net profit growth.