Report Interpretation

Overview

This earnings review assesses Wuxi Lead Intelligent's 2Q26 results and outlook. Nomura sees robust revenue, earnings and order growth, but lowers estimates and valuation for near-term margin pressure from overseas operations and foreign exchange effects.

Core views

Wuxi Lead reported 1H26 revenue of CNY8.2bn, up 24% year on year, including 2Q26 revenue of CNY4.5bn, up 28% year on year and 22% quarter on quarter. Battery-equipment revenue grew 35% year on year in 1H26. Earnings also strengthened: 1H26 earnings increased 29% year on year to CNY956mn, while 2Q26 earnings rose 47% year on year and 36% quarter on quarter to CNY551mn. Net margin improved to 11.7% in 1H26 and to 12.2% in 2Q26. Management indicated that, excluding foreign-exchange effects, adjusted 2Q26 earnings growth would have exceeded 70% year on year. The main negative in the results was gross-margin weakness. 1H26 gross margin declined 1.8 percentage points year on year to 31.9%, and 2Q26 gross margin fell 2.5 points year on year and 3.0 points quarter on quarter to 30.6%. Nomura attributes the pressure primarily to higher material and freight costs in the overseas business. This was partly offset by operating-cost discipline: the 2Q26 operating-expense ratio improved by 6.0 percentage points year on year and 4.6 points quarter on quarter to 16.8%, helping earnings grow despite lower gross profitability. Order intake supports the institution's medium-term view. Management said new contracts exceeded CNY18bn in 1H26, rising by more than 50% year on year, with about CNY9bn signed in 2Q26. Domestic battery customers contributed roughly 60% of 1H26 orders, overseas battery customers about 20%, and consumer electronics about 10%. The company also expanded into SOFC equipment, including coating, cutting, isostatic pressing and laser welding, and MLCC equipment such as casting-film, stacking and laminating machines. Nomura views the backlog as a basis for solid FY26-28F earnings growth, as leading battery manufacturers remain committed to capacity expansion amid elevated utilization, although second-tier producers are expected to slow new capacity rollout as project controls tighten. Reflecting near-term gross-margin pressure, Nomura reduced FY26-28F earnings forecasts by 1-7%, with operating-expense optimization providing a partial offset. Its revised forecasts put FY26F/FY27F/FY28F revenue at CNY18,299mn/CNY22,245mn/CNY24,888mn and normalized net profit at CNY2,346mn/CNY3,002mn/CNY3,542mn. Fully diluted normalized EPS is forecast at CNY1.50, CNY1.92 and CNY2.26, respectively, implying growth of 50.0%, 28.0% and 18.0%. Nomura maintains Buy but reduces its target price to CNY44 from CNY73. The revised target is based on 23x rolled-forward FY27F EPS of CNY1.92, equivalent to 1x PEG over FY26-28F and one standard deviation below the historical average. The report notes that the shares were trading at about 17x FY27F P/E, with the CNY44 target implying 31.6% upside from the CNY33.44 closing price on 28 August 2026.

Analysis framework

Nomura reviews quarterly revenue, margin, operating-cost and earnings trends, then links order intake and customer demand to its FY26-28F forecasts. It revises estimates for overseas cost and FX pressure and values the company using a forward P/E multiple cross-checked against PEG and its historical valuation range.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Forward P/E and PEG-based valuation

  Nomura sets its CNY44 target using 23x rolled-forward FY27F EPS of CNY1.92, describing this as 1x PEG over FY26-28F and one standard deviation below the historical average.

• Industry AnalysisVolume-price decomposition

  Revenue and gross-margin analysis

  The report separates strong revenue growth from lower gross margin, attributing the margin decline to higher overseas material and freight costs while assessing operating-cost optimization as an offset.

Asset mapping & comparison

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

• Wuxi Lead Intelligent Equipment (300450.SZ)

  Primary covered company; a battery-equipment supplier benefiting from backlog and demand from leading battery manufacturers.

  Strengths

  More than CNY18bn of 1H26 new orders, 35% year-on-year 1H26 battery-equipment revenue growth, operating-cost optimization, and expansion into SOFC and MLCC equipment.

  Weaknesses

  Overseas material and freight costs pressured gross margin, while FX effects reduced reported earnings growth.

  Comparison

  Leading battery manufacturers are expected to continue capacity expansion, whereas second-tier players are expected to slow new capacity rollout.

  Risks

  Lower battery-cell-maker orders, higher solar-sector bad-debt provisions, and weaker-than-expected ASSB commercialization.

Key data

• 1H26 revenueCNY8.2bn+24% year on year
• 2Q26 revenueCNY4.5bn+28% year on year and +22% quarter on quarter
• 2Q26 gross margin30.6%-2.5 percentage points year on year and -3.0 points quarter on quarter
• 2Q26 net profitCNY551mn+47% year on year and +36% quarter on quarter
• 1H26 new contractsOver CNY18bnMore than 50% year-on-year growth
• FY27F normalized EPSCNY1.92Used in the CNY44 target-price valuation

Impact & implications

Nomura's maintained Buy reflects its view that backlog, leading battery-customer expansion and new equipment categories can support earnings growth through FY28F. However, overseas gross-margin pressure and FX effects prompted lower earnings estimates and a materially lower valuation multiple and target price.

Risks

• Orders from domestic or overseas battery-cell makers could be lower than expected.
• Bad-debt provisions related to the solar sector could be higher than expected.
• Commercialization of all-solid-state batteries could be weaker than expected.

What to watch

• Whether overseas material and freight costs and FX effects continue to pressure gross margin.
• Order intake from domestic and overseas battery customers, particularly the pace of capacity expansion by leading manufacturers.
• Progress in SOFC and MLCC equipment and commercialization of all-solid-state batteries.