CICC has released a research report maintaining its Outperform rating on TIMES ELECTRIC (03898), while cutting the price target by 20% to HK$35, citing a decline in the sector valuation center. The new target implies 2026 and 2027 price-to-earnings ratios of 9.1 times and 8.1 times respectively, with a potential upside of 36%. The brokerage kept its 2026 and 2027 earnings forecasts unchanged at RMB 4.411 billion and RMB 4.817 billion.
The company reported revenue of RMB 20.818 billion for the first three quarters of 2026, up 10.56% year on year, with net profit attributable to shareholders of RMB 2.805 billion, up 3.11% year on year, in line with the brokerage's expectations.
First Three Quarters of 2026 Results Meet Expectations
The company announced its results for the first three quarters of 2026, posting revenue of RMB 20.818 billion, a year-on-year increase of 10.56%, and net profit attributable to shareholders of RMB 2.805 billion, up 3.11% year on year. On a quarterly basis, revenue in the third quarter of 2026 reached RMB 7.747 billion, up 17.10% year on year, while net profit attributable to shareholders was RMB 1.093 billion, up 4.18% year on year. The results were in line with the brokerage's expectations.
Both Rail Transit and Emerging Equipment Achieve Steady Growth
In terms of traditional business, the rail transit segment generated revenue of RMB 11.479 billion in the first three quarters of 2026, up 11.31% year on year. The brokerage attributes this mainly to the gradual delivery of new tender orders and incremental contributions from operation and maintenance services. Among the sub-segments, rail transit electrical equipment, rail engineering machinery, communication and signal systems, and other rail transit equipment recorded revenue of RMB 9.320 billion, RMB 1.016 billion, RMB 837 million and RMB 297 million respectively, representing year-on-year changes of growth of 15.43%, growth of 13.10%, growth of 10.44% and a decline of 48.25%.
In terms of emerging business, the new equipment segment generated revenue of RMB 9.244 billion in the first three quarters of 2026, up 9.70% year on year. Among these, the semiconductor, automotive, marine, new energy and industrial segments recorded revenue of RMB 4.469 billion, RMB 2.605 billion, RMB 840 million, RMB 795 million and RMB 535 million respectively, representing year-on-year changes of growth of 16.38%, growth of 39.49%, growth of 26.88%, a decline of 49.98% and growth of 14.28%. The brokerage believes that all sub-segments of the emerging business are expected to maintain a positive trend over the full year.
Rising Expense Ratios Weigh on Profitability
In the first three quarters of 2026, the company's gross margin stood at 31.8%, up 0.04 percentage points year on year, maintaining relatively solid profitability despite rising raw material prices. Selling, administrative, research and development, and financial expense ratios were 2.1%, 3.8%, 10.2% and -0.4% respectively, up 0.20, 0.01, 0.21 and 0.88 percentage points year on year. The net margin was 13.5%, down 0.97 percentage points year on year.
New Tenders and Maintenance Business Expected to Continue Supporting Rail Transit Results
According to China Railway Group, national railway fixed asset investment reached RMB 601.2 billion in the first three quarters of 2026, up 1.3% year on year. So far in 2026, a total of 268 sets of 350 km/h electric multiple units have been tendered, approaching the full-year tender volume of 2025, while 538 locomotives have been tendered, already exceeding the full-year volume of 2025. The brokerage believes that as the number of existing EMUs and locomotives in China grows, maintenance, intelligent upgrading and other businesses are also expected to form a stable revenue base.
Risk Warning
The sustainability of rail transit tendering may fall short of expectations; the ramp-up of IGBT may fall short of expectations; and there are foreign exchange risks.
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