Hongfa Technology (600885.SS): 2Q26 Results Beat, Lifting TP to Rmb45.0 on Strong Top Line and Further GPM Expansion

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Hongfa Technology (600885.SS): 2Q26 Results Beat, Lifting TP to Rmb45.0 on Strong Top Line and Further GPM Expansion

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29 Jul 2026 15:08:48 ET │ 14 pages

Hongfa Technology (600885.SS)

2Q26 Results Beat, Lifting TP to Rmb45.0 on Strong Top Line and

Further GPM Expansion

CITI'S TAKE

Global leading relay maker Hongfa reported better-than-expected 2Q26 Buy

results. While 2Q26 net profit of Rmb672mn (+21% YoY) was only 2% ahead

of Bloomberg consensus, revenue of Rmb5.9bn (+36% YoY) and GPM of Short-Term View: Upside, expires 03-AUG-26

33.2% (-1.5pp) beat consensus by 4% and 2.3pp, respectively, driven by Price (29 Jul 26 15:00) Rmb33.980

strong demand and ASP hike. Mgmt. commented on the results briefing Target price Rmb45.000↑that 1) strong demand is across the board due to not only industry demand

growth but also Hongfa’s market share gain and 2) more importantly, GPM from Rmb43.000

could recover to 3Q25 level (~35%) given ongoing ASP hikes and silver price Expected share price return 32.4%

decline. We therefore raise our 2026/27E earnings forecasts by 5%/11% and

Expected dividend yield 1.3%lift our TP by ~5% to Rmb45.0 as we increase revenue and GPM estimates.

Amid the volatile market, Hongfa remains one of our top picks given its Expected total return 33.7%

strong earnings visibility and potential upsides from 800V AIDC relays. Market Cap Rmb52,587M

US$7,766M1H26 revenue by product – NEV HVDC relay grew by 45% YoY to Rmb3.6bn in 1H26

due to market share gain; home appliance relay also increased by 40% YoY to

Rmb2.3bn, helped by ASP hikes which contributed 20pp revenue increase; auto

relay grew by 20% YoY to Rmb1.4bn due to ASP hike starting from 2Q26 while power

relay was also up 27% YoY due to recovering demand from Europe and China national Price Performance