Broker: UOB Kay Hian
Date of Report: Wednesday, 27 August 2025
Shenzhen Inovance Delivers Strong 2Q25 Results: Automation Recovery and NEV Surge Set to Drive Future Growth
Company Overview: Shenzhen Inovance
Shenzhen Inovance, a leader in automated control solutions, specializes in developing, manufacturing, and selling products such as low-frequency converters, servo drivers, and programmable logic controllers (PLCs). The company is listed under ticker 300124 CH in the electrical equipment sector.
Stock Highlights and Performance
- Current Share Price: RMB 71.49
- Target Price (Upgraded): RMB 82.20 (previously RMB 67.00)
- Upside Potential: +15.0%
- Market Cap: HK\$180,888m / US\$26,216m
- 52-week High/Low: RMB 81.71 / RMB 39.17
- Major Shareholder: Shenzhen Inovance Invest (17.40%)
- FY25 NAV/Share: RMB 10.48
- FY25 Net Debt/Share: (RMB 0.64)
2Q25 Earnings: Outperforming Expectations
Shenzhen Inovance reported robust results for the second quarter of 2025, with core earnings growth fueled by the NEV (New Energy Vehicle) and automation businesses. Despite maintaining a conservative full-year guidance due to geopolitical uncertainties, the company is well-positioned to exceed expectations.
| Metric |
2Q25 |
1Q25 |
2Q24 |
YoY Change |
QoQ Change |
| Revenue (RMB m) |
11,531 |
8,978 |
9,691 |
+19.0% |
+28.4% |
| Gross Profit (RMB m) |
3,418 |
2,782 |
2,793 |
+22.4% |
+22.9% |
| Operating Profit (RMB m) |
1,492 |
1,108 |
1,345 |
+10.9% |
+34.7% |
| Net Profit (RMB m) |
1,646 |
1,323 |
1,307 |
+25.9% |
+24.4% |
| Gross Margin (%) |
29.6 |
31.0 |
28.8 |
+0.8ppt |
-1.3ppt |
| Operating Margin (%) |
12.9 |
12.3 |
13.9 |
-0.9ppt |
+0.6ppt |
| Net Margin (%) |
14.3 |
14.7 |
13.5 |
+0.8ppt |
-0.5ppt |
Key Observations:
- Revenue Growth: Driven by NEV powertrain (35% YoY) and general automation (9% YoY).
- Margins: Gross margin declined sequentially due to a higher mix of lower-margin NEV business.
- Opex Ratio: Rose 1.7ppt YoY, mainly from a 57% increase in R&D spending targeting industrial software, large PLCs, and humanoid robots.
- Non-operating Boost: Reported net profit includes a RMB 238m investment gain, with core net profit up 13% YoY (excluding non-operating items).
Strategic Business Updates: Digitalization, Robotics, and Overseas Expansion
Automation and NEV Growth Momentum
- Full-year 2025 Guidance: Management expects revenue to grow 10-30% YoY and net profit 5-25% YoY, with a high likelihood of beating guidance if current momentum continues.
- General Automation: Anticipated acceleration in 2H25, barring unforeseen geopolitical shocks.
- NEV Business: On track for 30% YoY growth in 2025, expecting high-teens growth in the second half.
- Pricing Competition: Easing in 2025, supporting stronger margin outlook.
Industrial Software and Digitalization Platform
- 1H25 Sales: RMB 200m, primarily from factory digitalization (~RMB 100m) and energy digitalization (~RMB 50m).
- Profitability: The business is still in a loss-making phase, with profits not yet a primary KPI.
- Future Focus: Expansion into new client segments and applications, such as elevators and ports.
Humanoid Robotics: Entering the Next Frontier
- Development Focus: Hardware components for embodied robots including frameless torque motors, high-current actuators, planetary roller screws, and advanced vision systems.
- Product Status: Most offerings remain in the sampling stage; first commercial launches expected in 2H25 at the China International Industry Forum Expo in Shanghai.
Overseas Business: Rapid Growth with High Margins
- 1H25 Overseas Sales: ~RMB 1.3b, or 6% of total revenue.
- Segment Breakdown: RMB 600m from NEV, RMB 400m from elevators, RMB 300m from general automation.
- Margin Advantage: Overseas gross margin is 5ppt higher than domestic (35%).
- Regional Growth: Strongest in Southeast Asia; gaining traction in Europe, with future focus on Europe, Southeast Asia, Middle East, and LATAM.
Financial Forecasts and Upward Revisions
| (RMB m) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
30,420 |
37,041 |
44,950 |
52,000 |
58,750 |
| EBITDA |
4,793 |
5,081 |
6,366 |
7,221 |
8,130 |
| Net Profit |
4,742 |
4,285 |
5,474 |
6,330 |
7,226 |
| EPS (fen) |
177.2 |
159.1 |
203.2 |
235.0 |
268.3 |
| PE (x) |
40.4 |
44.9 |
35.2 |
30.4 |
26.6 |
| Net Margin (%) |
13.4 |
10.9 |
10.8 |
11.0 |
11.3 |
| ROE (%) |
18.4 |
15.4 |
16.2 |
16.4 |
16.5 |
Revised Earnings Forecasts
- 2025-2027 Net Profit: Upgraded by 7.7%/10.9%/4.7% to RMB 5,474m / RMB 6,330m / RMB 7,226m.
- Key Upward Drivers: Better general automation recovery and improved margins in automation and NEV, partially offset by weaker elevator segment.
- Valuation: Target price raised to RMB 82.20, PE multiple at 35x (five-year forward mean).
Key Metrics and Financial Health
| Metric |
2024 |
2025F |
2026F |
2027F |
| EBITDA Margin (%) |
13.7 |
14.2 |
13.9 |
13.8 |
| Net Margin (%) |
10.9 |
10.8 |
11.0 |
11.3 |
| ROA (%) |
7.6 |
8.0 |
8.3 |
8.6 |
| ROE (%) |
15.4 |
16.2 |
16.4 |
16.5 |
| Debt to Equity (%) |
14.8 |
14.4 |
12.5 |
10.9 |
| Net Debt to Equity (%) |
2.1 |
-5.3 |
-15.3 |
-21.5 |
Conclusion: Upgraded to BUY Amid Strong Industry Trends
Shenzhen Inovance stands at the forefront of China’s automation and NEV powertrain revolution. With accelerating growth in its automation and NEV segments, a bold digitalization and robotics strategy, and rapid overseas expansion, Inovance is well poised for sustained outperformance. The company’s upgraded BUY rating and target price of RMB 82.20 reflect both its proven resilience and future potential in a dynamic global environment.
Investors should watch for further milestones in industrial software and humanoid robotics, as well as continued overseas penetration, which could unlock additional value in the coming quarters.
