Kehua Data Co. (002335) Report Interpretation

Overview

Goldman Sachs reviews Kehua Data’s 2Q26 results and reassesses its data-center, energy-storage, IDC-service and smart-power outlook. The report sees improving sales momentum from Chinese data-center customers and overseas energy storage, but concludes that weaker domestic operations and margin pressure leave the risk/reward balanced.

Core views

Kehua reported 2Q26 revenue of Rmb2,454mn, gross profit of Rmb547mn, EBIT of Rmb191mn and net profit of Rmb318mn. These represented year-on-year changes of -2%, -3%, +12% and +82%, respectively, and differences of -12%, -10%, +23% and +6% versus Goldman Sachs estimates. Revenue therefore missed expectations, while net profit was broadly in line to slightly better. Gross margin was 22%, unchanged year on year and 6 percentage points below the estimate; EBIT margin was 8%, up 1 percentage point year on year and 4 percentage points above the estimate; and net margin was 13%, up 6 percentage points year on year and 8 percentage points above the estimate. Goldman Sachs attributes the sales shortfall mainly to sluggish domestic energy-storage and smart-power businesses. Better SG&A expense control supported net profit, while a rising contribution from higher-margin overseas energy storage helped offset raw-material inflation and domestic competition. Data-center products showed the clearest growth recovery. Goldman Sachs estimates that sales growth accelerated to 30% year on year in 2Q26 from a 5% decline in 1Q26. First-half segment revenue reached Rmb904mn, up 15% and equal to 23% of total revenue, driven mainly by domestic hyperscaler and colocation demand. The institution forecasts 27% year-on-year growth in 2H26E, compared with 15% in 1H26, as Kehua continues penetrating China’s AIDC supply chain for customers such as Tencent and Alibaba. The growth comes with a profitability trade-off: higher raw-material prices and a larger mix from Chinese hyperscalers, which generally carry lower margins than other domestic end markets, are expected to reduce segment gross margin to 28% in 2H26E from 31% in 1H26 and 32% in 2025. The report describes overseas data-center expansion as ongoing but expects visible progress in Southeast Asia before meaningful breakthroughs in developed markets. Energy storage presents a contrasting domestic and overseas picture. The segment generated approximately Rmb1,800mn of sales in 1H26, up 12% year on year and representing 46% of total sales. Growth was led by overseas markets, with Europe contributing more than 60% of segment sales and additional business in the United States, Southeast Asia and Latin America. Goldman Sachs expects strong overseas sales to continue in 2H26E. However, it says 2027E growth will depend both on demand and on how US and European regulations or policies restricting Chinese-made inverters are implemented. Kehua had not seen a meaningful geopolitical impact on its overseas business at the report date. Domestic energy-storage sales fell 24% in 1H26 because the company declined projects carrying low margins or cash-collection risks. Goldman Sachs forecasts 19% segment sales growth in 2H26E and a 24% gross margin, improving from 22% in 1H26 and 19% in 2025 as the overseas mix rises. IDC services contributed Rmb686mn in 1H26, up 15% year on year and accounting for 18% of total sales. The compute-rental model represented approximately 20% of segment sales, but IDC-service gross margin fell 8 percentage points year on year and 4 percentage points half on half to 12.5%. Goldman Sachs attributes the decline to higher depreciation after a new data center entered service in late 2025. Smart-power products remained weak: first-half sales were Rmb320mn, down 27% year on year and equal to 8% of total sales. The institution expects this softness to persist in 2H26E because domestic industrial capital expenditure remains weak. Following the results, Goldman Sachs cuts its 2026-30E net income forecasts by 6% on average. The revision reflects domestic energy-storage and smart-power weakness and gross-margin pressure in the domestic data-center market, partly offset by solid overseas energy-storage growth. Its revenue forecasts for 2026E, 2027E and 2028E fall to Rmb8,807.1mn, Rmb10,167.6mn and Rmb11,719.6mn from Rmb9,465.7mn, Rmb11,142.8mn and Rmb12,832.0mn. Corresponding EPS forecasts decline to Rmb0.93, Rmb1.07 and Rmb1.27 from Rmb0.96, Rmb1.17 and Rmb1.37. The longer-term thesis rests on Kehua’s leadership in China’s UPS market, globally competitive power-management products and a stable, technology-focused management team. The company has expanded from stand-alone UPS products into tailored power-management solutions for rail transit, data centers, electronics, oil and gas, base stations and other applications, while becoming a leading Chinese power-conversion-system supplier with increasing overseas energy-storage exposure. Goldman Sachs expects AI applications and rising data-center power demand to support domestic capex and Kehua’s data-center business. Against that opportunity, it believes the share price already reflects the domestic capex outlook and notes that overseas expansion, particularly in the United States, is slower than peer Kstar. Goldman Sachs consequently maintains Neutral and lowers its 12-month target price to Rmb32.0 from Rmb35.0. The target remains based on 30 times 2027E earnings. Against the Rmb30.83 closing price on 27 August 2026, the target implies 3.8% upside. The institution views the combination of growth exposure, execution challenges, competitive pricing, margin pressure and the current valuation as a broadly balanced risk/reward.

Analysis framework

Goldman Sachs first compares 2Q26 revenue, profit and margins with both the prior year and its own estimates. It then builds a segment-level outlook by linking demand, customer mix, geographic mix, input costs and depreciation to revenue growth and gross margins. Those operating conclusions feed into revised 2026-30E earnings estimates, after which the institution applies a 30x multiple to 2027E earnings to set the 12-month target price.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Forward P/E target valuation

  Goldman Sachs applies a 30x price-to-earnings multiple to its 2027E earnings forecast to derive the Rmb32.0 12-month target price.

• Corporate Fundamentals and FinanceEarnings Quality Analysis

  Revenue, gross-profit and expense-margin bridge

  The report explains why a revenue miss did not translate into a net-profit miss by separating gross-margin pressure from better SG&A control and comparing gross, EBIT and net margins with estimates.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Input-cost and customer-mix transmission

  The report traces how raw-material inflation, domestic competition and a larger share of lower-margin hyperscaler customers affect data-center gross margins, while geographic mix changes lift energy-storage profitability.

• Industry AnalysisSupply-demand framework

  End-market demand and capex analysis

  Data-center growth is linked to hyperscaler and colocation demand and rising AI-related power requirements, while smart-power weakness is tied to soft domestic industrial capital expenditure.

Asset mapping & comparison

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

• Kehua Data Co. (002335.SZ)

  Primary covered company with exposure to UPS, data-center power products, energy storage, IDC services and smart power.

  Strengths

  Leadership in China’s UPS market, competitive power-management technology, a stable core management team, accelerating domestic data-center demand and growing overseas energy-storage exposure.

  Weaknesses

  Domestic energy-storage and smart-power weakness, lower data-center margins, IDC depreciation pressure and slower US expansion than Kstar.

  Comparison

  Goldman Sachs says Kehua’s overseas expansion, especially in the United States, is slower than peer Kstar.

  Risks

  Overseas expansion, hyperscaler capex, regulation of Chinese-made inverters and domestic data-center or energy-storage price competition may differ from expectations.

• Kstar

  Competitor used to compare overseas expansion progress.

  Strengths

  The report indicates faster overseas expansion, particularly in the United States, relative to Kehua.

  Comparison

  Kehua’s US expansion is described as slower than Kstar’s.

Key data

• 2Q26 revenueRmb2,454mn-2% year on year, +72% quarter on quarter and 12% below Goldman Sachs estimates
• 2Q26 gross profitRmb547mn-3% year on year, +37% quarter on quarter and 10% below Goldman Sachs estimates
• 2Q26 EBITRmb191mn+12% year on year, +227% quarter on quarter and 23% above Goldman Sachs estimates
• 2Q26 net profitRmb318mn+82% year on year, +308% quarter on quarter and 6% above Goldman Sachs estimates
• 2Q26 margins22% gross margin / 8% EBIT margin / 13% net marginYear-on-year changes of 0pp, +1pp and +6pp, respectively
• 1H26 data-center product salesRmb904mn+15% year on year and 23% of total revenue
• 2H26E data-center outlook27% sales growth / 28% gross marginGrowth accelerates from 15% in 1H26, while gross margin falls from 31%
• 1H26 energy-storage salesApproximately Rmb1,800mn+12% year on year and 46% of total sales; Europe contributed more than 60% of segment sales
• 2H26E energy-storage outlook19% sales growth / 24% gross marginGross margin compares with 22% in 1H26 and 19% in 2025
• 1H26 IDC-service salesRmb686mn+15% year on year and 18% of total sales; gross margin fell to 12.5%
• 1H26 smart-power salesRmb320mn-27% year on year and 8% of total sales
• 2026-30E net income revision-6% on averageReflects weaker domestic businesses and margin pressure, partly offset by overseas energy-storage growth
• 12-month target priceRmb32.0Reduced from Rmb35.0 and based on 30x 2027E P/E

Impact & implications

The report expects Kehua’s growth mix to shift toward domestic AIDC products and overseas energy storage, but this does not translate fully into earnings because hyperscaler mix, raw-material costs, depreciation and weak domestic industrial demand pressure margins. With the share price viewed as already reflecting domestic data-center capex growth, Goldman Sachs sees balanced risk/reward and retains Neutral.

Risks

• Overseas expansion, especially in the United States, could proceed faster or slower than expected.
• Domestic hyperscaler capital expenditure could be better or worse than expected.
• Price competition in domestic data-center and energy-storage products could be better or worse than expected.

What to watch

• Track whether data-center product growth reaches the forecast 27% in 2H26E while gross margin declines toward 28%.
• Monitor US and European implementation of restrictions affecting Chinese-made inverters, which the report says could influence 2027E energy-storage growth.
• Watch Kehua’s overseas progress in Southeast Asia and whether it achieves meaningful expansion in developed markets.
• Monitor domestic industrial capex and whether smart-power weakness continues through 2H26E.