UOB Kay Hian
Date of Report: August 27, 2025
Shenzhen Inovance Surges Ahead: 2Q25 Earnings Beat, Automation and NEV Growth Fuel Bullish Outlook
Executive Summary
Shenzhen Inovance (300124 CH), a leading developer of automated control products, delivered robust 2Q25 results, surpassing analyst expectations and signaling strong momentum in both its automation and New Energy Vehicle (NEV) businesses. UOB Kay Hian has upgraded the stock to BUY and raised the target price, citing improving fundamentals, accelerating overseas growth, and strategic investments in industrial software and robotics. This article provides a comprehensive analysis of Inovance’s latest financials, operational highlights, and forward outlook for investors, market watchers, and analysts.
Company Snapshot: Shenzhen Inovance
Sector: Electrical Equipment
Share Price: RMB 71.49
Target Price: RMB 82.20 (raised from RMB 67.00)
Market Cap: RMB 180.9 billion (US$26.2 billion)
Shares Issued: 2,695 million
Major Shareholder: Shenzhen Inovance Invest (17.4%)
FY25 NAV/Share: RMB 10.48
FY25 Net Debt/Share: RMB (0.64)
52-week High/Low: RMB 81.71 / RMB 39.17
2Q25 Results: Core Earnings and Revenue Outperform

Core earnings rose 13% YoY to RMB 1.4 billion, 5% above house estimates, and in line with consensus.
Reported net profit was further boosted by RMB 238 million investment gain.
Revenue exceeded expectations, up 19% YoY and 28.4% QoQ, driven by NEV powertrain (and rail transit) and general automation segments (35% and 9% YoY growth, respectively).
Gross margin slightly improved YoY but declined sequentially, reflecting a shift to lower-margin NEV business.
Opex ratio increased by 1.7 percentage points YoY, mainly due to a 57% surge in R&D investment (industrial software, large PLCs, humanoid robots).
Key Financials and Forward Estimates

Operational Highlights: What’s Driving Inovance’s Growth?
Upbeat Guidance and Market Drivers
FY25 guidance remains unchanged: 10-30% revenue growth and 5-25% net profit growth, but management views this as conservative due to geopolitical risks.
General automation is expected to accelerate in 2H25, barring major external shocks.
NEV business is on track for at least 30% YoY growth, indicating strong momentum.
Pricing competition in 2025 is expected to ease, supporting margins.
Strategic Investments: Industrial Software & Robotics
Industrial Software/Digitalization: Sales reached RMB 200 million in 1H25, primarily from factory (RMB 100m) and energy digitalization (RMB 50m). While currently loss-making, the business is a strategic focus, supporting high-end hardware development (e.g., large PLCs).
Humanoid Robots: Initial development is focused on hardware such as frameless torque motors, high-current actuators, planetary roller screws, and vision systems. Product launches are expected in 2H25 at the China International Industry Forum Expo in Shanghai.
R&D Expenses: Up 57% YoY, reflecting aggressive investment in future growth areas.
Overseas Expansion Accelerates
Direct Overseas Sales: Up 39% YoY to RMB 1.3 billion in 1H25, accounting for 6% of group revenue.
NEV: RMB 600m
Elevator: RMB 400m
Automation: RMB 300m
Gross Margin Overseas: 5 percentage points higher than domestic operations (35%).
Key Regions: Southeast Asia led growth; traction is building with European clients. Expansion focus includes Europe, Southeast Asia, the Middle East, and LATAM, with expectations for overseas revenue to become more significant in 2-3 years.
Earning Revisions and Upgraded Valuation
Net profit forecasts for 2025-2027 were raised by 7.7%/10.9%/4.7% to RMB 5,474m/6,330m/7,226m.
Improvements reflect stronger automation recovery and better margins in automation and NEV, offset by lower elevator business contributions.
Target price increased to RMB 82.20, using a 35x PE multiple on 2026 forecasts, in line with the five-year historical average.
Key Estimate Changes

Financial Position and Operational Metrics
EBITDA Margin: 13.7% (2024), 14.2% (2025F), 13.9% (2026F), 13.8% (2027F)
Net Margin: 10.9% (2024), 10.8% (2025F), 11.0% (2026F), 11.3% (2027F)
ROE: 15.4% (2024), 16.2% (2025F), 16.4% (2026F), 16.5% (2027F)
Net Debt to Equity: 2.1% (2024), -5.3% (2025F), -15.3% (2026F), -21.5% (2027F)
Interest Cover: Rises from 26.2x (2024) to 49.4x (2027F)
Investment Case and Risks
Why UOB Kay Hian Upgraded to BUY
Strong earnings momentum in automation and NEVs.
Strategic investments in digitalization and robotics.
Rapidly growing overseas business, with higher margins than domestic operations.
Conservative management guidance provides potential for positive surprises.
Risks
Exposure to geopolitical uncertainties.
Product mix shift may affect margins in the short term.
Industrial software and robotics initiatives are not yet profitable but are strategic for long-term competitiveness.
Conclusion: Shenzhen Inovance Positioned for Accelerated Growth
Shenzhen Inovance has delivered another quarter of impressive growth, cementing its leadership in automation and NEV powertrain solutions. With an upgraded BUY rating and a higher target price, the company’s strategic focus on digitalization, robotics, and international expansion sets the stage for sustained value creation. Investors should watch for further earnings beats, overseas traction, and product launches in high-growth verticals in the coming quarters.