--- title: "Sanhua Intelligent Controls (1Q26 Trans): Still Targeting 15% YoY Net Profit Growth" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/40461232.md" description: "Data center-related new products are advancing on track. This year is expected to grow 50%-100% YoY." datetime: "2026-05-06T08:23:46.000Z" locales: - [en](https://longbridge.com/en/topics/40461232.md) - [zh-CN](https://longbridge.com/zh-CN/topics/40461232.md) - [zh-HK](https://longbridge.com/zh-HK/topics/40461232.md) author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)" --- # Sanhua Intelligent Controls (1Q26 Trans): Still Targeting 15% YoY Net Profit Growth **Below is Dolphin Research's summary of**$SANHUA(02050.HK) **FY26 Q1 earnings call. For our take on the print, see '**[**三花智控：汽零回正，机器人的 ‘盛夏’ 还要等多久？**](https://longbridge.com/en/topics/40460810)**'.** **I. Key takeaways from the results** 1\. **Guidance**: The full-year net profit growth target of 15% remains intact. The mix may skew better for autos and slightly softer for Refrigeration & Intelligent Controls, but the overall growth goal is unchanged vs. the start-of-year plan. 2\. **Headline metrics**: Q1 revenue was RMB 7.773bn (+1.36% YoY). Attrib. net income was RMB 927mn (+2.68% YoY), with ex-non attrib. NI at RMB 986mn (+15.52% YoY). GPM was 27.8% (+97bps YoY). 3\. **By segment**: Refrigeration & Intelligent Controls revenue was RMB 4.66bn (-6% YoY), with attrib. NI of RMB 470mn (-11.7% YoY) and GPM ~28% (+150bps YoY). Auto parts revenue was RMB 3.12bn (+15% YoY), with attrib. NI of RMB 460mn (+23% YoY) and GPM ~27.7% (+10bps YoY). 4\. **Non-operating items**: Q1 saw ~RMB 100mn MTM losses on securities investments and RMB 140mn FX losses (YoY impact ~RMB 190mn). Ex these, both segments delivered OP growth. **II. Earnings call details** **2.1 Management commentary** 1\. **Operating environment** a. External conditions were volatile in Q1, with Middle East tensions lifting raw material costs. FX swings added further challenges. b. Leveraging its global customer base, tech moats, cost discipline and footprint, the company grew against the tide. The overall trajectory remained steady. 2\. **Refrigeration & Intelligent Controls** a. Q1 revenue fell 6% YoY, mainly due to a high base last year from tariff-driven pull-ins and bigger subsidies. Extreme weather in the U.S. also dampened consumption this year. b. New products for data centers are progressing in an orderly manner. Management expects a 50%–100% increase this year vs. last year. c. North America (from May) should rebound in Q2, and domestic trade-in policies should help. Q2 is expected to return to YoY growth. 3\. **Auto parts** a. Q1 revenue rose 15% YoY, a notable post-COVID pace. This was driven by surging exports of China NEVs. b. Europe has restarted EV subsidies at EUR 3k–6k per vehicle. In Germany, BEV sales surpassed ICEs for the first time. c. The shift from components to integration is a clear trend. Integrated modules (large and small) now account for 45%–50%, lifting revenue and GPM. d. The customer mix is becoming more balanced, with the share of top accounts down to 20%–25%. Xiaomi, Leapmotor, Geely and Li Auto are performing well. e. Domestic sales mix increased to 65%–70% in Q1 vs. about 60% last year. Onshore growth was faster. 4\. **Emerging businesses** a. Humanoid robots: The division operates independently with a ~300-person team. Projects and plant build-outs are on track, focusing on actuators (body and dexterous hands) for global customers. b. Data center liquid cooling: A dedicated taskforce has been set up, with products spanning outdoor units and more. North American customers include Trane, Carrier and Daikin, while Vertiv and Envicool are served in China. c. Energy storage: Focused on components with capacity in China and Mexico. The impact of U.S. foreign-entity rules is largely manageable. 5\. **Cost and expense control** a. A copper pass-through mechanism covers ~90% of copper purchases, with a 1–2 month lag from procurement to production and logistics. The auto segment is mostly aluminum-based and relatively stable. b. From 2H25, strategy shifts from land grab to intensive operations. Management upgrades and efficiency gains are kicking in. c. Prior IT investments will start to deliver efficiency dividends from 2026. This should underpin ongoing improvements. **2.2 Q&A** **Q: What drove the revenue decline in Refrigeration & Intelligent Controls? How are data center products tracking, and any change to full-year guidance?** A: The segment declined 6% YoY, mainly due to last year's high base from February tariff hikes that pulled forward demand and increasing subsidies. In Q1 this year, extreme weather in the U.S. weighed on consumption. We expect an improvement in Q2, especially from May in the U.S. Data center-related products are advancing as planned and should rise 50%–100% this year vs. last year. The YoY decline should narrow in Q2, profits ex special items should grow, and the full-year targets are broadly unchanged. **Q: Auto segment growth was strong. Could Q2 and full-year trends beat expectations?** A: Our view aligns with yours. Q1 growth was mainly driven by strong exports of China NEVs. With traditional ICE costs spiking amid the global energy backdrop, Europe has reinstated sizable EV subsidies at EUR 3k–6k per unit. In Germany, BEVs have surpassed ICEs for the first time, and we see this trend continuing. We also expect autonomous driving use cases to scale quickly, with EVs as the natural carrier. We remain confident and maintain our forecasts for sustained growth into Q2 and the full year, with autos likely stronger and refrigeration slightly softer within the mix. The annual growth target is broadly in line with prior expectations. **Q: GPM improved YoY in Q1 despite raw material inflation. How are you managing this and what is the margin outlook?** A: Copper prices climbed rapidly, with last year's avg. at ~RMB 77k/tonne and Q1 at ~RMB 100k/tonne. Roughly 90% of our copper exposure is linked to customer pricing via a natural pass-through rather than a one-off reset. For the small unlinked portion, we hedge copper, zinc and aluminum. There is a 1–2 month lag from procurement to production and logistics, and under standard costing with variance allocation there is a timing effect. The auto segment is mainly aluminum, which is relatively stable with mostly fixed-price contracts. If aluminum breaks through certain levels, price talks are triggered, subject to competitive dynamics. Beyond commodities, product mix also helped margins. With higher energy-efficiency standards and smart features, high-end, higher-tech products are gaining share and supporting GPM. Over the past decade, GPM has been broadly stable at 25%–30%, with a ~28% median. Some volatility is normal as products and end markets are at different stages of development. **Q: Any client-side or capacity updates for the humanoid robot business?** A: Due to NDAs with key customers and strict internal confidentiality, we cannot disclose more. From what we observe, execution is on track. Since the division became independent last year, the organization has been robust and we are still hiring. The team is nearing 300 people, and projects and factory construction are progressing in an orderly way. **Q: What is the lag for copper pass-through in Refrigeration? Any progress on cost-down and material substitution?** A: For the controls segment, copper runs with a 1–2 month lag from purchasing to production to logistics. Over a decade ago, when copper first surged from the low-20k range, we agreed copper-linked pricing indices with major customers, now covering ~90% of volume. Thus copper volatility is passed through downstream via this mechanism. For autos, aluminum is predominant and relatively stable with fixed prices, with renegotiations triggered beyond certain thresholds subject to market competition. **Q: What specifically drove the 15% growth in autos? How does the shift from components to integration affect results?** A: The domestic NEV market is booming, and consumers have fully embraced it after years of development. The experience gains from smart driving are pronounced, and leading new-energy OEMs continue to launch new models and post solid results. Another key driver is the move from components to system integration. The share of integrated systems is rising sharply, lifting both revenue and GPM. **Q: GPM split by segment?** A: Refrigeration & Intelligent Controls posted ~28% GPM in Q1, up 150bps YoY. Autos delivered ~27.7% GPM in Q1, up 10bps YoY. **Q: Autos domestic vs. overseas split? Order trends from European OEMs, and customer mix?** A: Domestic sales grew faster in Q1, lifting the onshore mix to 65%–70% from about 60% last year. Beyond Europe, Southeast Asia also saw growth, and higher energy costs from Middle East tensions had a global impact. In Europe, overall volumes are rising, and direct parts sales into Europe are up. The customer structure is balanced, with the top-account share down to 20%–25% vs. last year. Leading customers such as Xiaomi, Leapmotor, Geely and Li Auto also performed well in our sales mix. We expect this balanced structure to continue. **Q: Q1 opex control was strong. Outlook for full-year G&A and R&D as a percentage of sales?** A: The lower Q1 expense ratio is likely a phase effect. Last year we shifted from land grab to intensive ops, and from 2H25 we have been enhancing management, including upgrading talent and applying AI. So Q1 this year vs. Q1 last year benefited from a higher base in the prior period. Our principle is to invest where needed and save where possible. We will keep investing in emerging areas, talent development and digital R&D as long-term priorities. At the same time, we will push cost-down and efficiency in current processes and tools. We made heavy IT investments in prior years, and from 2026 these efficiency gains and unit expense reductions should become more structural. This will support long-term margin improvements. **Q: Any directional guide for Refrigeration in Q2 on a YoY basis?** A: Based on our rolling plan, Q2 should return to growth. North America should see volume recovery, and domestic trade-in subsidies should stimulate the internal cycle. Some new products will also land gradually this year. These will add incremental revenue as they ramp. **Q: With a high base last year in Q2, any directional color similar to Q1?** A: External uncertainties remain. Even so, we still expect some growth in Q2. We stick to the start-of-year plan of 15% net profit growth for 2026. Whether in autos or appliances, defending the stock market and expanding to new markets should deliver growth, and margin improvement will follow this path. **Q: Q4 saw high GPM and high opex, while Q1 GPM declined QoQ. Why?** A: Refrigeration GPM was indeed strong in Q4. Copper spiked to ~RMB 100k/tonne at year-end, while the quarter average was ~RMB 87k, so sales pricing adjusted faster than costs due to inventory lags, supporting Q4 margins. FX also helped, as USD/CNY moved from ~7.1 to ~6.9. As for higher Q4 opex, year-end is settlement season, with accruals for bonuses and project expenses concentrated in Q4, so it tends to run higher every year. **Q: Customer details for liquid cooling and energy storage? Was the ~RMB 600mn storage revenue last year mainly from a North American customer? How do you assess and address the U.S. foreign-entity rules?** A: The U.S. data center build-out has been rapid in recent years, and China is also scaling quickly. We formed a dedicated project team, and products are spread across BUs with coverage in outdoor units and beyond. In North America, we work closely with Trane, Carrier and Daikin. In China, we supply commercial products to Vertiv and Envicool. For energy storage, we focus on components, with capacity in China and Mexico. On the U.S. foreign-entity rule (e.g., limiting China content to ≤45% of value), our assessment is that the impact is largely controllable. **Q: Will the humanoid strategy continue to prioritize North America, or will you also expand to major domestic customers? Any revenue contribution yet?** A: Our strategic positioning in robots is unchanged, with resources focused on marquee customers at this stage. The industry is still moving from 0 to 1, and mass production in real application scenarios has yet to materialize. We will concentrate limited resources on benchmark accounts. China has also developed strongly in robotics with many promising customers, and as a core component supplier we target global robot customers per the fundamentals of a B2B business. We remain bullish on the sector and see broad use cases. We are still in R&D, working with customers on samples and iterations, and cannot share more due to confidentiality. **Q: How is domestic customer development for robots? Do products fully overlap with those for your marquee customer?** A: We focus on actuators in robotics, including body actuators and dexterous hands. Some strong domestic customers are undergoing sampling and iterations now. Products differ from those for the marquee customer, as we offer both body and dexterous hand actuators with customization for different clients. All projects are in rapid R&D iteration. **Q: Any quantification for the shift to integration in autos? Share of integrated modules and content per vehicle?** A: Integrated modules are the inevitable evolution of NEV thermal management from components to systems. By product category, integrated modules (large and small) account for roughly 45%–50%, which is a high share. These modules incorporate many in-house parts such as valves and expansion valves. They are ultimately delivered to customers as integrated modules. **Q: A major North American customer lifted Q1 production, but this did not fully align with the autos growth rate. Why?** A: The customer's Q1 sales were down YoY, and its contribution to our mix also fell. This relates to changes in the customer's overall business volume and may be linked to its broader industrial restructuring. **Risk disclosure and disclaimer:**[**Dolphin Research Disclaimer and General Disclosure**](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [002050.CN](https://longbridge.com/en/quote/002050.CN.md) - [002837.CN](https://longbridge.com/en/quote/002837.CN.md) - [09863.HK](https://longbridge.com/en/quote/09863.HK.md) - [01810.HK](https://longbridge.com/en/quote/01810.HK.md) - [81810.HK](https://longbridge.com/en/quote/81810.HK.md) - [XIACY.US](https://longbridge.com/en/quote/XIACY.US.md) - [02050.HK](https://longbridge.com/en/quote/02050.HK.md) - [HXXD.SG](https://longbridge.com/en/quote/HXXD.SG.md)