MGI Tech maintains double-digit revenue growth, with improved margins and expenses, but losses have yet to be eliminated

Overview

The report reviews MGI Tech's 1H26 and implied 2Q26 performance. Revenue continued to grow, while overseas operations, the reagent product mix, and expense control jointly improved operating performance. However, the bottom line remained loss-making, so Nomura maintains its Neutral rating and CNY52.46 target price and highlights the need to continue monitoring the company's loss-making status.

Core views

MGI Tech announced its 1H26 results on 21 August 2026. First-half revenue increased 18.9% YoY to CNY1,366mn, implying 2Q26 revenue of approximately CNY780mn, up 15% YoY, indicating that sales continued to deliver double-digit growth. Profitability improved but remained negative: 1H26 net loss attributable to shareholders narrowed 6.4% YoY to CNY158mn, while net loss excluding non-recurring items narrowed 20.9% YoY to CNY161mn. The report's core assessment is that losses are narrowing, but revenue growth has yet to translate into net profit. In terms of regional performance, sales in China increased 12.0% YoY to CNY857mn in 1H26; management stated that the company maintained a solid market leadership position. Overseas sales increased 33.8% YoY to CNY483mn, significantly outpacing the Chinese market, mainly due to a recovery in growth in the Americas. The regional data indicate that the domestic business continues to provide a substantial revenue base, while overseas markets were the faster source of growth in the first half. Operational improvement came from gross margin expansion and expense control. Driven by revenue growth and a product mix shift toward reagents, 1H26 gross margin increased by approximately 3 percentage points YoY to 57.0%. During the same period, operating expenses declined 12.7% YoY to CNY804mn, with selling, administrative, and R&D expenses of CNY322mn, CNY204mn, and CNY277mn, respectively, down 6.8%, 13.1%, and 18.4% YoY. Revenue growth, a higher contribution from high-margin products, and declines across the three major expense categories jointly improved operating profit, but were not yet sufficient to eliminate the net loss. Nomura maintains its Neutral rating and CNY52.46 target price, versus a closing price of CNY74.79 on 21-Aug-2026. The target price is derived using a DCF model, assuming a WACC of 10.5% and a perpetual growth rate of 4.5%, with the CSI 300 Index as the stock's benchmark; Nomura's Neutral rating indicates that the stock is expected to perform broadly in line with this benchmark over the next 12 months. Despite improvements in operating metrics, the report explicitly recommends closely monitoring the company's loss-making status. Downside risks to the target price include geopolitical risks and dependence on related parties; potential upside factors include increased business opportunities in the domestic market and stronger-than-expected overseas sales.

Analysis framework

The report first derives 2Q26 revenue and its YoY growth rate from 1H26 revenue, then compares growth differences between the Chinese and overseas markets. It subsequently explains the improvement in operating profit through changes in gross margin, the reagent product mix, and selling, administrative, and R&D expenses, while assessing the path to profitability in conjunction with the net loss. Finally, it estimates the target price using a DCF model and lists the potential upside and downside factors that could affect achievement of the target price.

Methodology notes

• Valuation methodologyDCF discounted cash flow

  DCF valuation

  The report discounts the company's future cash flows to present value, using a 10.5% WACC as the discount rate and 4.5% as the perpetual growth rate, deriving a target price of CNY52.46.

• Company fundamentals and financial framework

  YoY breakdown of revenue, margins, and expenses

  The report assesses overall performance through YoY changes in revenue and net loss, then explains the sources of operational improvement using regional sales, the reagent product mix, gross margin, and selling, administrative, and R&D expenses.

Asset mapping & comparison

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

• MGI Tech (688114 CH)

  The A-share company covered in the report, which recorded 1H26 revenue growth and improved operating profit but remained loss-making.

  Strengths

  Maintained a solid market leadership position in China; overseas sales increased 33.8% YoY; gross margin rose to 57.0%; selling, administrative, and R&D expenses all declined YoY.

  Weaknesses

  1H26 net loss attributable to shareholders remained CNY158mn, while net loss excluding non-recurring items was CNY161mn; revenue growth has yet to deliver positive net profit.

  Comparison

  Overseas sales growth of 33.8% exceeded the Chinese market's 12.0%, with overseas growth mainly driven by a recovery in the Americas.

  Risks

  Downside risks include geopolitical risks and dependence on related parties; potential upside factors include increased domestic business opportunities and stronger overseas sales.

Key data

• 1H26 revenueCNY1,366mnUp 18.9% YoY
• Implied 2Q26 revenueApproximately CNY780mnUp 15% YoY
• 1H26 net loss attributable to shareholdersCNY158mnNarrowed 6.4% YoY
• 1H26 net loss excluding non-recurring itemsCNY161mnNarrowed 20.9% YoY
• China market salesCNY857mnUp 12.0% YoY in 1H26
• Overseas market salesCNY483mnUp 33.8% YoY in 1H26, mainly driven by a recovery in growth in the Americas
• Gross margin57.0%Increased by approximately 3 percentage points YoY
• Operating expensesCNY804mnDown 12.7% YoY
• Selling expensesCNY322mnDown 6.8% YoY
• Administrative expensesCNY204mnDown 13.1% YoY
• R&D expensesCNY277mnDown 18.4% YoY
• Target priceCNY52.46Unchanged
• Closing priceCNY74.7921-Aug-2026
• DCF discount rate10.5%WACC assumption
• DCF perpetual growth rate4.5%Terminal value growth assumption

Impact & implications

The report believes that faster overseas business growth, a product mix shift toward reagents, and expense reductions are improving MGI Tech's operating performance and narrowing its losses. However, the company has yet to achieve net profitability, so whether sales growth can continue to translate into profit remains critical. Based on this balanced assessment, Nomura maintains its Neutral rating and CNY52.46 target price.

Risks

• Downside risk: Geopolitical factors may impede achievement of the target price.
• Downside risk: The company's dependence on related parties may affect operations and valuation.
• Potential upside factor: Domestic market business opportunities exceed expectations.
• Potential upside factor: Overseas sales perform better than expected.

What to watch

• Closely monitor the company's continued loss-making status and whether operational improvements can drive a turnaround to positive net profit.