Summary of Shenzhen Inovance Technology 3Q25 Earnings Call Company Overview - **Company**: Shenzhen Inovance Technology (300124.SZ) - **Industry**: China Industrials - **Stock Rating**: Overweight - **Price Target**: Rmb95.00 - **Current Price (as of October 23, 2025)**: Rmb79.25 - **Market Capitalization**: Rmb212,129 million Key Financial Highlights - **3Q25 Revenue**: Increased by 21% year-on-year (y-y) to Rmb11.1 billion, aligning with estimates and consensus, driven by: - **Automation Segment**: +27% y-y - **NEV Powertrain Segment**: +15% y-y - Specific revenue growth in automation products: - AC Drives: +13% y-y - General Servo: +26% y-y - PLC: +26% y-y - Industrial Robots: +23% y-y [2][4] - **Gross Profit Margin (GPM)**: Decreased by 1.2 percentage points y-y and 2.1 percentage points quarter-on-quarter (q-q) to 27.5%, below the estimated 30.0%. The decline was primarily due to: - NEV Powertrain GPM fell by 2.9 percentage points y-y to 14.4% [3] - **Net Profit**: Increased by 4% y-y to Rmb1.3 billion, which was 5% below estimates and 9% below consensus. The decline in asset disposal gains (Rmb167 million in 3Q24 vs. nil in 3Q25) impacted results. Recurring net profit grew by 14% y-y to Rmb1.2 billion, in line with estimates [4] Market Outlook and Strategic Focus - **Key Areas to Watch**: - Growth outlook for 2026 by segment - Demand momentum from downstream markets - Price competition and margin outlook - Business updates in humanoids, digitalization, globalization, and new products [8] Valuation Methodology - Price target derived from: - Applying a 35x 2026 estimated P/E for core business, based on historical valuation levels - Applying a 5x 2030 estimated P/S ratio for the humanoids business, consistent with peers [11] Risks - **Upside Risks**: - Stronger-than-expected macroeconomic conditions boosting demand for automation products - Higher-than-expected sales of ePVs equipped with Inovance's EV control system in 2025 [12] - **Downside Risks**: - Inability to develop high-end automation products, leading to declining average selling prices (ASP) for low-end products due to competition - Greater-than-expected GPM decline due to raw material price increases [13] Conclusion Shenzhen Inovance Technology's 3Q25 results reflect solid revenue growth driven by automation and NEV segments, although GPM pressures and net profit performance indicate challenges ahead. The company remains focused on strategic growth areas and faces both upside and downside risks in the evolving market landscape.