Report Interpretation

Overview

This earnings review assesses Wuxi Lead Intelligent Equipment after 2Q26 results. Nomura views the company’s order momentum and battery-equipment backlog as supportive of solid FY26-28 earnings growth, while reducing forecasts and valuation for near-term overseas gross-margin and foreign-exchange pressure.

Core views

Wuxi Lead reported 1H26 revenue of CNY8.2bn, up 24% year-on-year. In 2Q26, revenue was CNY4.5bn, up 28% year-on-year and 22% quarter-on-quarter; battery-equipment revenue grew 35% year-on-year in 1H26. Earnings nevertheless faced a mix shift in profitability: 1H26 gross margin fell 1.8 percentage points year-on-year to 31.9%, while 2Q26 gross margin declined 2.5 points year-on-year and 3.0 points quarter-on-quarter to 30.6%. Nomura attributes the weakness mainly to higher material and freight costs in the overseas business. The 2Q26 operating-expense ratio improved to 16.8%, down 6.0 points year-on-year and 4.6 points quarter-on-quarter, partially offsetting the gross-margin pressure. As a result, 1H26 earnings rose 29% year-on-year to CNY956mn; 2Q26 earnings were CNY551mn, up 47% year-on-year and 36% quarter-on-quarter, with a 12.2% net margin. Management indicated that adjusted 2Q26 earnings growth would have exceeded 70% year-on-year excluding FX changes. Order intake remains the central support for the outlook. The company signed more than CNY18bn of new contracts in 1H26, more than 50% above a year earlier, including about CNY9bn in 2Q26. Domestic battery customers accounted for roughly 60% of 1H26 intake, overseas battery customers about 20%, and consumer electronics about 10%. Nomura expects leading battery manufacturers to continue expanding capacity because utilization rates remain elevated, while second-tier producers slow new projects amid tighter controls. The report also highlights expansion into SOFC equipment, including coating, cutting, isostatic pressing and laser welding, and MLCC equipment such as casting-film, stacking and laminating machines. Nomura expects solid FY26-28 earnings growth from the backlog but lowers its FY26-28 earnings forecasts by 1-7% to reflect near-term gross-margin pressure, partly offset by operating-expense optimization. Its revised forecasts show FY26F revenue of CNY18,299mn and normalized net profit of CNY2,346mn, followed by FY27F revenue of CNY22,245mn and normalized net profit of CNY3,002mn, and FY28F revenue of CNY24,888mn and normalized net profit of CNY3,542mn. Revised diluted normalized EPS is CNY1.50 for FY26F, CNY1.92 for FY27F and CNY2.26 for FY28F. The institution maintains Buy but cuts the target price to CNY44 from CNY73. The new target uses 23x rolled-forward FY27F EPS of CNY1.92, replacing the prior 45x FY26F P/E basis. Nomura describes the selected valuation as equivalent to 1x PEG over FY26-28F or one standard deviation below the historical average. At the reported closing price of CNY33.44 on 28 August 2026, the target implied 31.6% upside; the stock was trading at about 17x FY27F P/E.

Analysis framework

Nomura reviews quarterly revenue, gross margin, operating-cost ratios, earnings and FX effects, then links order intake and customer capacity plans to its FY26-28 forecasts. It revises earnings for near-term margin pressure and values the company using a forward P/E multiple cross-checked against PEG and historical valuation levels.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Forward P/E and PEG valuation

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

• Industry AnalysisSupply-demand framework

  Battery-equipment demand assessed through capacity expansion, utilization and order intake

  The report links elevated utilization at leading battery makers and more than CNY18bn of 1H26 new contracts to the company’s backlog and future earnings growth.

• Industry AnalysisVolume-price decomposition

  Revenue and margin analysis

  Nomura separates revenue growth from gross-margin deterioration and operating-expense improvement to explain the movement in quarterly profitability.

Asset mapping & comparison

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

• Wuxi Lead Intelligent Equipment (300450 CH)

  Primary covered company; expected to benefit from battery-equipment backlog and capacity expansion by leading battery manufacturers.

  Strengths

  More than CNY18bn of 1H26 new contracts, strong battery-equipment growth, improving operating-expense ratio, and expansion into SOFC and MLCC equipment.

  Weaknesses

  Overseas material and freight costs pressured gross margin; FX changes also affected reported earnings.

  Comparison

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

  Risks

  Lower-than-expected battery-cell-maker orders, higher solar-sector bad-debt provisions, and slower-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
• 1H26 new contractsOver CNY18bnMore than +50% year-on-year
• 2Q26 net profitCNY551mn+47% year-on-year and +36% quarter-on-quarter
• FY27F diluted normalized EPSCNY1.92Used in the revised CNY44 target-price valuation
• FY26-28 earnings forecast revision-1% to -7%Reflects near-term gross-margin pressure, partly offset by operating-expense optimization

Impact & implications

Nomura sees the order backlog, continued expansion by leading battery makers and new SOFC and MLCC opportunities as supporting medium-term growth. Near-term overseas material, freight and FX effects reduce expected profitability and drive the lower forecasts and target price, but do not alter the maintained Buy rating.

Risks

• Orders from domestic or overseas battery-cell makers could be lower than expected.
• Bad-debt provisions in the solar sector could be higher than expected.
• Commercialization of ASSBs could be slower than expected.

What to watch

• Order intake from domestic and overseas battery customers and the pace of leading manufacturers’ capacity expansion.
• Whether overseas material and freight costs ease enough to stabilize gross margin.
• FX effects on reported earnings and the extent of operating-expense optimization.
• Progress in commercializing ASSB-related equipment and expanding SOFC and MLCC equipment sales.