Sanhua Intelligent Controls (Trans): 2026 internal net profit growth target at 15% ---
Below is Dolphin Research's summary of the$SANHUA(02050.HK) FY25 earnings call Trans
I. Key takeaways
1. Guidance: For 2026, the internal target is ~15% net profit growth. Profit growth is guided to run slightly ahead of revenue, while no top-line guide is provided given macro uncertainty.
2. Headline results: FY25 revenue was RMB 31.0 bn (+11% YoY), breaking the RMB 30 bn mark for the first time. Attributable net profit reached RMB 4.06 bn (+31% YoY).
3. Margin by segment: Auto net margin improved to ~18% in 2H, while home appliances held around ~10%. Auto margin expansion was driven by efficiency gains and mix upgrades.
4. Investment gains/losses: H-share investments in HK incurred an approx. RMB 100 mn mark-to-market loss, a one-off that weighed on overall profit. This was non-recurring in nature.
5. Capex plan: Three-year capex remains at RMB 6–8 bn, focused on overseas bases (Mexico, Vietnam, Poland, Thailand) and strategic emerging businesses. Proceeds from the HK IPO have already seen RMB 2–3 bn deployed into industrial expansion.
II. Call details
2.1 Management remarks
1) Refrigeration (Home Appliances)
a. Revenue RMB 18.59 bn (+12.2% YoY), GPM 28.77% (+140bps), attributable net profit RMB 2.08 bn (+30.9%). Profitability improved alongside mix and scale.
b. The largest customer is Midea. Other top accounts cluster around global HVAC leaders such as Daikin and Carrier.
c. Commercial HVAC outperformed with revenue up ~20% and net profit up ~40%. Customer stickiness is high, and import substitution has ample room.
2) Auto Parts
a. Revenue RMB 12.43 bn (+9.1% YoY), attributable net profit RMB 1.98 bn (+31%). Profit leverage outpaced sales growth.
b. The top two customers remain Tesla and BYD, with the landscape unchanged. Xiaomi, XPeng, Geely, Leapmotor, Li Auto, GAC and Seres are also key accounts.
c. 2025 is the first year of 'quality uplift and dual improvement', and the path is clear. Management expects a virtuous cycle over the next 2–3 years.
3) Strategic Emerging Biz. (Data Centers + Energy Storage + Bionic Robots)
a. The former humanoid robot unit has been reclassified as 'Strategic Emerging Biz.', covering thermal management for data centers and energy storage, plus bionic robot components. The scope is broader and solution-oriented.
b. FY25 data center + energy storage thermal management revenue is ~RMB 2.0 bn (vs. ~RMB 1.0 bn in FY24), implying 50–100% growth. Within that, data centers contribute ~RMB 1.4 bn and energy storage ~RMB 0.6 bn.
c. Data center products include valves, heat exchangers, sensors, quick couplings and flow control valves. The company mainly serves thermal management integrators (Tier 1) and has started direct engagement with US CSP majors, though not yet in mass production.
d. In 2026, data center and energy storage thermal businesses are expected to grow 50–100%. The growth runway is intact.
4) Bionic Robots
a. Internally, the term has been standardized to 'Bionic Robots' to avoid hype. The focus is on substance over concept.
b. Positioning is as a component supplier, expanding from early anchor accounts to a broader set of high-potential customers. The customer base is being diversified in stages.
c. Execution is progressing well, but details cannot be disclosed due to NDAs. Management emphasized ongoing traction without specifics.
d. The strategy is to pursue differentiated competition and avoid commoditized red oceans. Barriers will be built around unique capabilities.
2.2 Q&A
Q: Auto net margin reached ~18% in 2H while home appliances eased to ~10%, creating a spread. What drove this, and how do you see segment profitability?
A: In autos, 2025 is seeing broad-based improvement in GPM, opex efficiency and net margin with internal efficiency measures and mix upgrades. In prior years we focused on footprint expansion, customer acquisition and R&D, while this year we are more selective on projects and customers, lifting operating efficiency. This is year one of management enhancement, and profitability has stepped up meaningfully.
The home appliance industry is mature, and our operations have been optimized over two decades, effectively at a '90 out of 100' level. Further upside is harder, so we expect a solid and stable performance profile.
For 2026, our preliminary internal forecast and budget imply high-efficiency operations. Profit growth should run slightly ahead of revenue growth.
Q: With copper and aluminum prices rising, what are your countermeasures? How is stainless replacing copper progressing?
A: Three approaches. First, for copper-based products, pricing is largely linked to copper, and as copper moves up from a low base, historical cost accounting causes a lag that can slightly lift margins; most copper products are directly indexed to copper.
Second, for the smaller portion not directly linked to copper, we hedge to manage risk, as reflected in futures investment gains and fair value changes in the annual report. Hedging smooths volatility.
Third, on materials substitution, beyond stainless-for-copper we are developing aluminum-for-copper and polymer-for-metal alternatives. Tests show stainless often outperforms copper in many dimensions, and our early layout anticipated this trend, so overall raw material inflation is relatively favorable to us. The only concern is potential demand suppression if prices rise too far.
Q: You invested RMB 400 mn in the Thailand plant. How should we think about overall capex and overseas capacity build-out?
A: Despite uncertainties, we have zero hesitation investing in secular directions, particularly AI and AI applications. Nearly half of last Jun's HK listing proceeds (RMB 2–3 bn) has already been deployed into industrial expansion, including the Thailand plant and overseas capacity.
We maintain a three-year capex plan of RMB 6–8 bn. Overseas hubs include Mexico, Vietnam and Poland, with Thailand a focus in coming years for SE Asia and North America.
Thailand offers a supportive investment climate, mature supply chains and solid workforce backing, making it a key base alongside Vietnam. In line with a 'do not put all eggs in one basket' approach, we will continue to invest across the four overseas hubs.
Q: Are the RMB 1.0 bn (2024) and RMB 2.0 bn (2025) for liquid cooling in data centers and energy storage on the same basis?
A: For 2025, strategic emerging businesses total roughly RMB 2.0 bn on a preliminary sum-of-parts basis. Of that, energy storage thermal is ~RMB 0.6 bn and data center components ~RMB 1.4 bn, implying 50–100% growth.
For 2024, data center revenue was around RMB 1.0 bn. The bases are comparable by scope.
Q: How does pricing pass-through work for aluminum in the auto segment? Any extra price-down pressure this year impacting margins?
A: Aluminum is the main raw material for auto parts and has also risen. Unlike copper-linked home appliance products, most auto customers do not accept direct price indexation, so we primarily hedge to mitigate volatility.
We have years of hedging experience from the appliance copper business and have applied it to aluminum. In parallel, we are advancing material substitution, including alloy-for-aluminum and polymer-for-metal solutions.
Q: New energy vehicle (NEV) thermal revenue growth slowed while ICE thermal grew faster. What drove this, and what is the 2026 trend?
A: We remain firmly committed to NEVs. After penetration reached a certain level and with macro noise, some short-term volatility is normal, so NEVs remain our strategic focus.
That said, we will not abandon ICE. As a component supplier, we pursue both, and we have noticed some pickup in traditional autos. Both NEV and ICE thermal management will be developed in parallel.
Medium to long term, EVs have lower usage costs and better performance, with rising fuel costs enhancing the relative advantage. Grassroots checks in smaller cities in Jiangsu and Zhejiang suggest growing acceptance among younger and middle-aged users.
Overseas NEV penetration remains very low, especially BEVs outside China. Once users adopt EV habits, the inflection overseas could be rapid, so we are very optimistic over the mid-to-long term.
Q: How were Q1 production schedules and YoY trends for auto and home appliances? What is the cadence across the four quarters of 2026?
A: Q1 was affected by macro factors, including NEV policy noise and some demand pull-forward from 2025 subsidies that exited, which weighed on Q1. Internally, we still expect slight YoY growth, supported by new markets and margin initiatives.
Growth may decelerate, but the trajectory should remain positive. Near-term pressure exists, yet factors such as higher oil prices highlight EV cost advantages.
We still expect slight YoY growth in Q1, meaningfully outperforming downstream industry trends. Our relative performance remains resilient.
Q: Why has the robot strategy shifted from anchoring on flagship customers to covering all high-potential players?
A: The strategy is self-consistent. In the 0-to-1 stage of bionic robots, we had to focus on a few top benchmark customers to stand out and co-develop.
After years of development, bionic robots are flourishing, especially in China and the US where many start-ups and majors have entered. As a component supplier, the B2B model implies we cannot limit ourselves to a handful of customers and must cover all strong players.
The core strategy has not changed. The focus has naturally shifted with the industry's development stage.
Q: Robot OEMs are increasingly in-sourcing actuators. How do you view competition and your advantages?
A: The root of 'cutthroat competition' is homogeneity and lack of core strengths. Our approach is to build unique capabilities and moats and focus on differentiated areas.
We are prepared to forgo extremely commoditized, red-ocean segments where we lack proprietary edge, doubling down on areas of strength. Post-consolidation, the market may only support the top 3–5, or even top 1–2.
For Sanhua to stay evergreen, we must pursue innovation and differentiated competition. That is the long-term path.
Q: Of the RMB 1.4 bn data center revenue, what is the split between direct sales to CSPs and indirect via integrators? Any next-gen product and new customer updates?
A: We are still primarily serving thermal management integrators (Tier 1). We are engaging with CSP majors but not yet at mass production.
The current figures are compiled from various subunits and are not fully complete. We will share more once statistics are finalized.
Q: How is the 2025 customer mix in the refrigeration segment?
A: Midea is the largest customer. Other top accounts are mainly global HVAC leaders such as Daikin and Carrier.
Q: Outlook for commercial HVAC, its split vs. residential, market share and growth targets?
A: Commercial revenue is up ~20% in 2025 with net profit up ~40%, a strong showing. Commercial customers have very high stickiness and stability, and once in, the relationship is sustainable.
Commercial is a standout growth driver within refrigeration. The main logic is import substitution, as a large share is still held by US/EU suppliers, leaving meaningful room for Chinese vendors.
Commercial also carries significant strategic emerging content, including energy storage thermal, data center thermal, sensors and liquid-cooling flow valves. Conservatively, we expect commercial revenue growth to sustain around ~20%.
Q: Previous 3-year mid-term guides (10% for refrigeration, 20% for autos) — any change under the current environment?
A: Internally, we aim to keep net profit growing ~15% per year. The top line is subject to macro, demand and policy swings, so we do not provide a firm revenue guide.
Our primary KPI is net profit growth, for which we have clear goals and plans. That remains the focus.
Q: There is a gap between reported revenue of the auto sub and the auto segment. Why? Also, why the growth divergence between commercial and micro-channel businesses?
A: There is an approx. RMB 500 mn difference between consolidation and management reporting, mainly due to differences in equity and management structures after building overseas entities. On business drivers, valves/controllers and sensors in commercial grew faster than micro-channel heat exchangers.
That reflects differences in product mix, form factors and market development stages. The divergence is structural rather than cyclical.
Q: Why did Q4 refrigeration GPM rise meaningfully? And why did Q4 G&A ratio increase?
A: Two reasons for higher Q4 GPM in home appliances. First, as copper rose from a low, sales prices adjusted earlier while costs lagged under historical costing, creating a timing benefit.
Second, high-efficiency products performed strongly in Q4, and mix optimization lifted margins. On expenses, we make routine inter-period adjustments annually, which is normal.
Additionally, H-share investments in HK incurred about RMB 100 mn of paper losses in 2025, dragging on operating profit. Excluding this one-off, core operating profit would have been stronger.
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