GoerTek: Past Vietnam hiring trap; margins recovering, growth still stalled?

GoerTek released its Q1 2026 results and FY2025 report (through Mar 2026) after the A-share close on Apr 23 Beijing time. Key takeaways are below:

1) Overall results: $Goertek(002241.SZ) Q1 revenue was RMB 18.7bn, up 14% YoY. The top line returned to growth on strength in smart components, but still missed the street at RMB 21.7bn. GPM was 13.8%, up 140bps YoY. Margin swings over the past two quarters were driven mainly by volatility in smart acoustic assemblies. The notable recovery in overall margins signals share recovery on key orders.

2) Smart devices: H2 2025 revenue was RMB 33.4bn, down 10% YoY. Legacy lines (PS series, older Quest models) saw shipment declines, weighing on revenue. New lines (AI glasses, next-gen MR) have yet to produce a 'hit' product.

3) Traditional hardware and components

① Smart acoustic assemblies H2 2025 revenue RMB 14.6bn, +8.5% YoY, mainly on the product cycle. The 2025 new AirPods boosted demand but did not scale meaningfully. As for margins in smart acoustic assemblies, GPM has largely recovered to ~10%, and share has visibly rebounded.

On the H2 2025 GPM 'flash crash' to ~0.4%, Dolphin Research believes it was mainly driven by US–China tariff dynamics, which prompted capacity relocation to Vietnam. Meanwhile, many peers built plants and hired aggressively in Vietnam, and GoerTek’s higher wage offers to secure labor inflated costs, compressing margins in the near term.

② Precision components H2 2025 revenue RMB 10.4bn, +18.7% YoY. This is the most resilient segment. Despite softer downstream electronics demand as state subsidies tightened, the market still sought upgrades in high-end components, sustaining growth.

4) Opex and operations: Core operating expenses totaled RMB 1.9bn this quarter, with a core expense ratio of 10%, roughly flat YoY. Inventory stood at RMB 13.56bn, up RMB 0.48bn QoQ. Inventory-to-revenue was 0.73, indicating a higher inventory level.

Dolphin Research view: Margins revived, but the growth engine is still shifting gears

GoerTek’s quarterly print was average. Revenue and margins improved YoY, but sales were clearly below expectations. The positive is the margin rebound, suggesting last H2’s margin dip was a short-term shock.

As Q1 disclosures are limited, we read them alongside the annual report:

a) Smart acoustic assemblies: Some recovery, but still soft, mainly because the new AirPods launched by the key customer (Apple) in Sep did not become a breakout hit.

b) Smart devices: posted a double-digit decline, reflecting a transition between old and new products. Within smart devices, the largest revenue contributors are game consoles and VR/MR, where the company is a major supplier for PS5 and Oculus. However, PS5 is late-cycle, and Oculus 3S has also been weak.

On the other hand, AI glasses are still early-cycle with no standout product yet, weighing on smart device momentum.

c) Precision components: maintaining double-digit growth, the most stable segment. Even with muted downstream electronics, precision components should benefit from value-per-unit upgrades and higher penetration of in-house parts.

The biggest 'bomb' in the annual report was the sharp drop in smart acoustic assembly margins to 0.4%.

For the H2 2025 margin 'flash crash', the main reasons were: ① US–China tariff effects triggered a rush to expand and hire in Vietnam, creating a temporary labor shortage and forcing higher wages; ② smart acoustic assemblies are highly concentrated in Vietnam and are labor-intensive assembly; ③ AirPods shipments peak in H2.

Dolphin Research sees this as a short-term labor mismatch. Q1 margins also confirm it is not a structural issue.

With GoerTek’s current mkt cap at RMB 86.2bn, this implies ~21x 2026E PE (assumptions: revenue +1%, GPM 14%, tax rate 9%). Versus its historical 20x–40x range, current valuation sits near the low end, mainly because growth visibility is lacking.

Overall, the margin rebound this quarter signals share gains at key accounts and fading labor cost pressure. Even so, growth remains elusive.

PS5’s late-cycle phase and Oculus weakness will keep pressure on results, while AI glasses still lack a blockbuster, leaving smart devices in a transition. Adding a weaker USD as a headwind (nearly 90% of revenue is overseas), earnings and multiples may stay under pressure.

Below are GoerTek’s financials and related charts: