Goldman Sachs maintains its Buy rating on Yingliu: Near-term earnings revised down, but capacity, orders, and long-term agreements support medium- to long-term upside

Overview

This is a 2Q26 earnings preview and investment view update on Yingliu (603308.SS) from Goldman Sachs. The report's core conclusion is that although the pace of capacity expansion and scope for price increases are below previous expectations, resulting in a roughly 10-11% reduction in 2026-30E EPS forecasts, capacity expansion, order backlog, long-term customer agreements, and global gas turbine demand related to the company's gas turbine and aviation engine businesses remain supportive, and Goldman Sachs maintains its Buy rating.

Core views

Goldman Sachs believes the market's focus has shifted from Yingliu's own execution to whether global gas turbine order growth has peaked. The report acknowledges that order growth in 2027 may be difficult to sustain at the unusually high level seen in 2026, but expects order levels to remain solid, supported by the replacement cycle for equipment installed in the early 2000s and incremental power demand from data centers. If hyperscalers provide clearer guidance on data-center capital expenditure for 2027 and beyond, order visibility could extend again into 2028-29 and even further, supporting a valuation re-rating.

Analysis framework

The report evaluates the company using an integrated framework covering earnings preview, capacity ramp-up, orders and backlog, long-term customer agreements, raw-material cost pass-through, relative valuation, and discounted target price analysis. Earnings forecasts are based on monthly output value for the two-engine business, the pace of commissioning new equipment in 2H26, stable assumptions for traditional businesses, gross-margin recovery assumptions, and judgments on long-term revenue and profit compound growth.

Methodology notes

• Valuation methodsForward P/E discounted target price

  Discounting 2030E P/E to 2027E

  Goldman Sachs' 12-month target price of Rmb82.4 is based on a 30x 2030E P/E, discounted to 2027E using a 10.0% cost of equity.

• Earnings forecastsCapacity ramp-up and order-driven forecasting

  Output value and equipment commissioning pace of the two-engine business

  The report uses monthly output values for April-June, the commissioning timing of three new pieces of equipment, and approximately Rmb10mn of monthly output value per unit at normal utilization to derive output value for the two-engine business and total revenue from 2Q26 through 4Q26.

• Industry demandGas turbine order-cycle analysis

  Replacement cycle and AIDC power demand

  The report links global gas turbine demand with the replacement cycle for equipment installed in the early 2000s, data-center power demand, and capacity bottlenecks at major OEMs to conclude that order levels remain resilient.

Asset mapping & comparison

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

• Yingliu (603308.SS)

  The report's covered security, rated Buy

  Strengths

  High-end casting components supplier with expansion opportunities in the gas turbine and aviation engine supply chains; cooperation with customers including Baker Hughes, Siemens Energy, Ansaldo, and GE Aerospace; global market share remains low, leaving substantial long-term growth potential.

  Weaknesses

  Current global market share remains below 1%, and the company remains a supplementary supplier relative to Western suppliers; capacity ramp-up, yield improvement, and skilled-worker recruitment present execution challenges; management prioritizes strategic customer relationships and market share, so near-term pricing actions are not aggressive.

  Comparison

  The report states that Yingliu currently trades at 38.6x 12-month forward P/E, slightly below the approximately 40x historical average since 2018; 2026E P/E is approximately 40.5x, below the peer median of 45.6x.

  Risks

  Capacity ramp-up below expectations, order growth below expectations, weaker AIDC demand, or hyperscalers canceling orders from gas turbine manufacturers.

Key data

• 2Q26 revenue forecastRmb916mnUp 27% year over year.
• 2Q26 net profit forecastRmb118mnUp 23% year over year.
• 2Q26 gross margin forecast34.5%Above 33.7% in 1Q26, supported by sequential easing of raw-material pressure and partial cost pass-through.
• 2Q26 output value of the two-engine businessApproximately Rmb420mnMonthly output value was approximately Rmb130-140mn in April and May and approximately Rmb150mn in June.
• 3Q26E output value of the two-engine businessApproximately Rmb450-480mnDriven by the commissioning of new equipment and capacity ramp-up.
• 4Q26E output value of the two-engine businessApproximately Rmb480-530mnAssuming equipment ramp-up in 2H26 proceeds broadly as planned.
• Current order backlogMore than Rmb2.2bnSlightly up from approximately Rmb2.1bn at the end of 1Q26, net of quarterly deliveries.
• 2Q26 new ordersApproximately Rmb500mnIncludes orders from customers such as Ansaldo, Baker Hughes, Shanghai Electric, Doosan, and Safran.
• EPS revisionDown approximately 10-11% for 2026-30EPrimarily reflects the latest pace of capacity expansion and relatively limited pricing actions.
• 12-month target priceRmb82.4Lowered from Rmb92.0 previously; rating maintained at Buy.

Impact & implications

The implication for Yingliu is that near-term earnings expectations have been reset, but the medium- to long-term thesis remains intact. In the near term, the company needs to demonstrate that the new equipment can be commissioned as planned and that yield improvements and skilled-worker recruitment can support capacity release. In the medium term, it needs to convert cooperation with customers such as Baker Hughes and Siemens Energy into stable orders. Long-term upside depends on whether tight global gas turbine supply and demand and AIDC power demand can persist. From a valuation perspective, the current P/E is slightly below its historical average, and if order visibility improves, the risk-reward profile remains skewed to the upside.

Risks

• New capacity ramps up below expectations, potentially due to insufficient yield improvement or difficulty recruiting skilled workers.
• Order growth falls below expectations, potentially due to lengthy new-SKU development cycles.
• AIDC demand weakens, or hyperscalers reduce or cancel orders from gas turbine manufacturers.
• Raw-material price volatility may still affect margins, although some long-term agreements include pricing adjustment mechanisms.
• If hyperscalers' capital-expenditure visibility beyond 2027 remains limited, the market may continue to value the company as a cyclical stock.

What to watch

• The commissioning and production progress of the three new pieces of equipment around August, September, and October 2026.
• Whether output value for the two-engine business in 3Q26E and 4Q26E can reach approximately Rmb450-480mn and Rmb480-530mn, respectively.
• The pace of order conversion following the renewal of the Baker Hughes long-term agreement, particularly the certainty of converting orders after 2027 into deliveries in 2028 and beyond.
• The entry into mass production of Siemens Energy 4000F prototypes, progress on the 8000H and SGT-450/700/800 projects, and developments at the Hainan joint laboratory.
• Whether annual global gas turbine demand remains at approximately 110-120GW and whether data-center power demand can remain sustained.
• Hyperscalers' disclosures on AIDC capital-expenditure plans for 2027 and beyond.