Record 2Q26 Revenue and Significant Margin Improvement; Maintain Buy

Overview

Following the release of 2Q26 results, Rianlon delivered strong revenue and margin performance. The company achieved record revenue of Rmb1.80bn and net profit of Rmb165mn, mainly driven by volume growth in polymer material anti-aging additives, accelerating lubricant additive exports, price increases and an improved product mix.

Core views

Goldman Sachs believes the market underestimates the potential of the company's product diversification and geographic expansion. Polymer material anti-aging additives will benefit from domestic polyolefin capacity expansion and industry consolidation; the lubricant additive business has room for growth and margin improvement, supported by overseas market expansion, certification progress and capacity expansion.

Analysis framework

The report analyzes quarterly results and the management conference call, covering revenue by business, gross margin, expenses, cash flow, capacity and volume guidance; it then raises earnings forecasts based on better-than-expected gross-margin delivery and applies a discounted EV/EBITDA valuation method.

Methodology notes

• Valuation methodsDiscounted EV/EBITDA

  Discounting the 2028E EV/EBITDA exit multiple to mid-2027

  The target price is based on 10x 2028E EV/EBITDA, discounted to mid-2027 at an 8.2% WACC.

• Factor AnalysisGS Factor Profile

  Comparison of growth, financial returns, valuation and composite factors

  Using standardized rankings and percentiles, the company's growth, financial returns and valuation are compared with the market and industry peers.

Asset mapping & comparison

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

• Rianlon (300596.SZ)

  Covered company

  Strengths

  Leading position in polymer material anti-aging additives, expanded product portfolio, overseas market growth, improving lubricant additive profitability and one-stop solution capabilities.

  Weaknesses

  Expenses were higher than expected, while short-term net profit was affected by foreign-exchange losses.

  Comparison

  The lubricant additive market has long been dominated by Western companies, leaving room for the company to improve market share and margins.

  Risks

  Slowing global demand, rising raw-material prices, slower-than-expected overseas capacity construction and ramp-up of new capacity, intensifying competition and value dilution from acquisitions.

Key data

• 2Q26 RevenueRmb1.80bn, up 19% YoY8% above Goldman Sachs' expectation and a record high.
• 2Q26 Gross Margin24.6%Up 2.9 percentage points YoY and 2.6 percentage points above Goldman Sachs' expectation.
• 2Q26 EBITRmb219mn, up 60% YoY23% above Goldman Sachs' expectation; EBIT margin was 12.2%.
• 2Q26 Net ProfitRmb165mn, up 24% YoYA record high and 6% above Goldman Sachs' expectation; weighed down by Rmb24mn in foreign-exchange losses.
• Full-year Lubricant Additive Volume Target80,000 to 90,000 tonnesManagement maintained guidance and expects 2H26 shipments to exceed 1H26.
• 12-month Target PriceRmb60.0Raised from Rmb58.0, implying 35% upside.

Impact & implications

Results validate the company's ability to improve profitability through price increases, cost pass-through and overseas business expansion. While YoY growth in polymer material anti-aging additives is expected to moderate in 3Q26, absolute shipments are likely to remain at the elevated 2Q26 level; a higher overseas mix, certification conversion and new capacity in lubricant additives are medium-term growth catalysts.

Risks

• Global economic activity weaker than expected.
• Construction and execution risks related to overseas capacity expansion.
• Higher crude oil prices could increase raw-material costs.
• New capacity ramp-up slower than expected.
• Aggressive capacity expansion by competitors could intensify price and market-share competition.
• Acquisitions could dilute value.

What to watch

• Whether 3Q26 polymer material anti-aging additive shipments can maintain the absolute 2Q26 level amid a high base.
• 2H26 lubricant additive shipments and progress toward the full-year target of 80,000 to 90,000 tonnes.
• The impact of a higher overseas business mix on lubricant additive gross margin.
• Order ramp-up following API certifications for gasoline and diesel engine oils.
• Commencement and construction progress of the 125,000-tonne phase-two lubricant additive capacity at the Malaysia base.
• Changes in crude oil and raw-material costs and the company's pricing pass-through capability.