Sieyuan Electric (002028.SZ) 2Q26 results 35 yoy growth in advances from customers implying strong revenue visibility

Equity Research 17 August 2026 | 3:07PM CST

Sieyuan Electric (002028.SZ): 2Q26 results: 35% yoy growth in advances from customers implying strong revenue visibility

Sieyuan announced 1H26 results that are in line with its pre-announcement (see Zhou Li | link). Gross margin came in at 31.6%, recovering 2.6pp qoq (above our Goldman Sachs (China) Securities expectations), while EBIT came in at 19.8%, also beating our previous estimate of Company Limited

17.2% due to stringent SG&A expense control. We reiterate our Buy rating, as we Jacqueline Du | view the lower-than-expected 2Q26 revenue as largely timing- and FX-related rather Goldman Sachs (Asia) L.L.C. than demand driven, with order intake and product shipments remaining intact. Advances from customers at the end of 2Q26 saw 22% qoq/35% yoy growth (up Hao Chen | from 23% yoy growth at the end of 1Q26), implying strong revenue visibility. Finished Goldman Sachs (China) Securities Company Limited goods and shipped goods among inventories at the end of 2Q26 saw 33% and 15% yoy growth respectively.

Looking ahead, we expect earnings to be back-end loaded in 2H26 as deferred overseas revenue is recognized, while the margin mix should improve due to higher contribution from North American transformers and UHV/EHV projects, offsetting the lower-margin EPC and ESS businesses. Sieyuan is currently trading at 27x 12-m forward P/E, which we view as attractive, and we forecast a 23% EPS CAGR in 2027E-30E, driven by a continued global grid investment upcycle and market share expansion. We slightly revise our 2026E-30E EPS up by <1%, and our new 12-m TP rises to Rmb204.5 (from Rmb203.7), still based on 2028E P/E of 25x, and discounted back to 2027E at a COE of 9.5%.

Detailed breakdown of 1H26 results:

Switchgear recorded revenue of Rmb4,330mn, +22% yoy; GPM was 39%, +4pp yoy, with growth slower than firmwide trend as some high-margin large orders fell outside of Q2, while EHV (750kV) orders will start to be gradually recognized as revenue in 3Q26. Going forward, we believe GIS (Gas Insulated Switchgear) will be driven by EHV and UHV demand, while AIS (Air Insulated Switchgear) will increasingly be driven by export demand.

Transformer recorded revenue of Rmb2,261mn, +12% yoy; GPM was 36%, +1pp yoy, reflecting a higher share of DDP (Deliver Duty Paid)-based shipments extending the revenue recognition cycle. Shipments to the US will start to see contribution starting from 3Q26 onwards, per our forecast.

Power electronics recorded revenue of Rmb540mn, -25% yoy; GPM was 19%, -14pp yoy, due to a high base last year resulting from a large project.

Relay protection recorded revenue of Rmb1,145mn, +16% yoy, with GPM of 35%,

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Goldman Sachs Sieyuan Electric (002028.SZ)

EPC recorded revenue of Rmb1,117mn, +38% yoy, with GPM of 11%, -2pp yoy. Domestic EPC remains weak, especially because solar demand has weakened after the 2025 installation rush. Given the low margin of new energy EPC projects, Sieyuan will not prioritize growth in the domestic EPC business, per the company. Overseas EPC remains the growth driver: conventional EPC margins are at 10%-12% with the company’s net margin roughly similar to its gross margin due to its asset-light model; additionally, mobile/pre-fabricated substations offer higher margins, while driving in-house equipment sales.

ESS recorded revenue of Rmb1,391mn, +231% yoy, with GPM of 11%, +4pp yoy. ESS orders fell sharply yoy in Jan-May as Sieyuan tightened order intake on the back of losses incurred in 1Q26 due to lithium price increases. Following lithium carbonate hedging measures taken in April, Sieyuan resumed order intake in June, with a strong contract…