HONGFA TECHNOLOGY - A: 2Q26: Record scale + margin repair, with AIDC engagement widening beyond relays; stay OW

Research evidence excerpt

HONGFA TECHNOLOGY - A: 2Q26: Record scale + margin repair, with AIDC engagement widening beyond relays; stay OW

(852) 2800-8502

Stock view: Hongfa has outperformed the CSI300 by ~20% since April, shrugging mufan.shi@jpmorgan.com

off the 4Q25 miss-induced price slump seen in March, bringing YTD Beatrice Lam

outperformance to ~12%. This price action suggests the market is increasingly (852) 2800-8738

underwriting a “normalization + structural growth” path, and management’s tone beatrice.lam@jpmorgan.com

on the 2Q26 briefing leaned into confidence on both demand visibility (orders J.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) Limited

through year-end; some into next year) and the pace of profitability repair into

2H26. Maintain OW.

• The earnings recovery YTD became harder to dismiss once management

tied record scale to a cleaner margin trajectory. In our view, Hongfa’s 2Q26

print serves as an acceleration quarter where demand stayed strong beyond

pricing: revenue rose 36% Y/Y to Rmb5,914MM and net profit rose to

Rmb877MM, both record highs since listing, while net profit attributable rose

21% Y/Y to Rmb672MM and NPM recovered to low-double-digit terms (vs.

HSD terms in the prior two quarters). This combination matters because it

shows scale expansion did not come at the cost of profitability optics, which

was the central investor concern after the 4Q25 major miss. Management also

pointed to a ~1ppt Q/Q GPM improvement as materials eased and pricing

landed more fully, reinforcing that the earlier margin shock was a timing

mismatch rather than a demand issue, and positioning 2H26 as an execution

story rather than a debate about franchise resilience.

• Pricing power came through as a system rather than a

negotiation.