| Item | Content |
|---|---|
| Rating | Neutral (Hold and wait for 10-28 Q3 results validation) |
| Target Price | RMB 52-64 (base-case fair value; current price RMB 65.51, closing price as of 2026-10-19) |
| Current Price / Market Cap | RMB 65.51 / RMB 26.72 billion (4.078 hundred million total shares) |
| Margin of Safety | Approx. -21% (base-case fair value lower bound of RMB 52 vs current price of RMB 65.51, calculated in this report) |
| Probability-Weighted Midpoint | Approx. RMB 56.9, current price is about 15% above it |
| Time Horizon | 6-12 months |
| vs Last Report (2026-08-30) | Judgment overvalued → fair; target price RMB 58-66 → RMB 52-64 |
| Item | Last (anchor RMB 78.55) | This Report (anchor RMB 65.51) | Drivers of Change |
|---|---|---|---|
| Rating (stance) | Neutral (avoid chasing highs) | Neutral (wait and see) | Neutral maintained: the -16.6% share price decline completed valuation digestion ahead of fundamental changes, but the current price remains above the upper edge of the new base-case range, with odds not yet turning positive |
| judgment | overvalued | fair (upper edge of fairly valued) | Share price fell 16.6% into the base-case range; fundamental signals actually strengthened during the period (Q1 inductors +115.4%, orders +400%, Huidong production start) |
| Target Price Range | RMB 58-66 (diluted base) | RMB 52-64 (base-case fair) | Exit multiple anchor lowered from 28-32x to 26-30x (benchmarked against the conservative tier of peers' 2028E forward of approx. 20x), compounded by a 25.4% downward revision in consensus within 90 days |
| Confidence | 0.55 | 0.55 | Maintained: direction depends on three event types — Q3 results, Section 337 investigation, and H-share pricing; level of certainty unchanged |
Previous tracking condition settled: The old watchlist item "reassess allocation window if the share price falls below RMB 66 (entering the base-case fair range)" was triggered on 2026-10-19 (close of RMB 65.51). Conclusion of this reassessment: although the share price has entered a discussable valuation range, it remains about 15% above the revised probability-weighted midpoint, and two unresolved risk variables emerged in early October — the Section 337 investigation and the delayed H-share filing — hence we maintain a wait-and-see stance and set the 10-28 Q3 results as the next decision point. Other tracking conditions (AI inductor growth, gross margin, cash flow) were not triggered: before the Q3 report disclosure, none of the invalidation conditions under the interim report basis has been hit.
Substantive new information during this update window: ① 2026-09-07 announcement on Huidong base investment progress — Phase I completed government acceptance and entered large-scale production, chip inductor backlog up approx. 400% YoY; ② 2026-10-09 USITC launched a Section 337 investigation into the Vicor case on vertical power delivery systems (VPD); all three of the company's major customers (Delta, MPS, Flex) are among the 20 respondents; ③ 2026-09-30 CSRC issued a supplementary materials request for the H-share filing, pushing back the issuance timeline; ④ share repurchase for cancellation executed through 9-30 totaling RMB 95.79 million; ⑤ PV installations Jan-Aug down 57.9% YoY, but August single-month turned positive at +50% YoY.
Poco New Materials is a vertically integrated magnetic materials company with the No.1 global share in alloy soft magnetic powder cores (CIC 2025: 27.1%), and its AI chip inductor second growth curve is now being realized in the financials: inductors accounted for approx. 35% of revenue in 2026H1 (approx. 25% in 2025), Q1 inductor revenue +115.4% (gross margin 49.6%), backlog +400% YoY. But the 17% share price pullback from RMB 78.55 to 65.51 has largely completed the valuation digestion flagged in the last report — the current price implies 46.0x 2026E consensus (RMB 581 million) and 32.7x 2027E (RMB 818 million); reverse DCF shows the current price embeds approx. 38% profit CAGR for 2026-28, about 7% above sell-side consensus extrapolation, leaving zero margin for error. Base-case fair value is RMB 52-64, with the current price about 15% above the probability-weighted midpoint, and the three-scenario distribution is left-skewed (bear RMB 25-30 / bull RMB 79-89). Conclusion: scarce quality but the price has not yet reached a position with a margin of safety — rating Neutral; the 10-28 Q3 report (whether quarterly net profit attributable to shareholders can reach ≥ RMB 172 million), the Section 337 investigation, and H-share pricing are the three keys that will unlock direction.
Core change: The volume ramp of AI chip inductors and capacity commissioning is a strong, announcement-verified change — Huidong Phase I (planned 200 million units/year, approx. 2x total 2025 inductor output) completed acceptance and started production in September 2026, land for Phase II (66.11 mu) was awarded in August, and the Thailand base is expected to begin trial production within the year (timing not independently confirmed); backlog +400% YoY (announcement basis). The simultaneous change on the risk side is a double overhang: the Section 337 investigation (customers implicated) + H-share filing delay (supplementary materials on 9-30).
Primary share price driver: The slope of chip inductor revenue (share of revenue × ASP × mix). Leading indicators are the Q3 report's quarterly revenue/net profit QoQ, disclosure of inductor revenue share, backlog, blended gross margin, and quality of operating cash flow.
Verifiable expectation gap: Consensus 2026E net profit of RMB 581 million (8 analysts) implies 2026H2 growing 57.5% QoQ over H1, whereas the same-seasonality basis in 2025 was only +18.6% — the consensus path is itself optimistic and has already been cut 25.4% within 90 days. If Q3 quarterly net profit reaches ≥ RMB 172 million (75% progress against the RMB 530 million equity incentive profit target), the expectation gap is positive; if below that level, further consensus downgrades are possible, and the floor of the 46x forward valuation will rise further.
Validation catalysts and falsification conditions: See tracking table in Section VII. The opportunity is judged a "conditional event opportunity": the current price is not an allocation point; wait for the Q3 report to validate the inductor slope, for the 337 customer chain to be de-risked, or for the price to fall to the lower edge of the base-case range (RMB 52-61) with fundamentals unchanged — only then do the odds turn positive.
Key evidence:
Interpretation and risks: The judgment on leadership position and integration moat holds, but three constraints must be stated — ① "40%+ gross margin" is the full-year 2025 basis; 2026H1 has already fallen to 38.57%; the industry percentile data on gross margin is a 2026-08 snapshot and has not been updated since; the "top 100th percentile of industry" phrasing is no longer used in this text; ② PV installations show a dual signal of a single month turning positive coexisting with full-year downgrades; evidence for a "controllable slope" is insufficient, revised to "slope uncertain"; ③ the +100% server power supply core growth lacks a revenue-share base, so the offset cannot be quantified. Validation of powder core downstream diversification falls to the Q3 report: if Q3 powder core revenue turns negative QoQ and the PV-chain customer share rises, this thesis comes under pressure; if installations turn positive YoY for two consecutive months, the worst point may have passed.
Key evidence:
Interpretation and risks: Evidence of the inflection point being realized is strengthening (orders, capacity, and revenue share all rising), but three points warrant cooling the market narrative: ① the "+400% orders" is a multiple on a low base a year ago (Huidong was not yet producing in September 2025 and inductors had just started ramping); the announcement did not disclose absolute amounts, and the "backlog of RMB 900 million+" is an earnings-briefing figure — both have limited extrapolation value; ② the per-unit usage data (approx. 4,800 units per GB300 rack → approx. 9,000-11,000 for Rubin) comes from supply-chain teardowns, not NVIDIA's official BOM; no primary public source was found in this review, to be used only as directional reference; ③ Q1's simultaneous price-and-volume rise (ASP +28.1%) occurred early in the ramp and is unsustainable given customary annual price-downs, while four production lines (Huidong Phase I / hot-pressing / Phase II / Thailand) convert to fixed assets in concentration over 2026H2-2027 — the company itself acknowledged in the 5-08 minutes that incremental depreciation creates gross margin pressure. The Section 337 investigation cannot be downplayed: Vicor's earlier NBM case resulted in an ITC exclusion order (final ruling in its favor, February 2025), and its patents remain valid despite PTAB challenges — the petitioner has a track record of winning and enforcing; if the exclusion order's scope is interpreted to cover VPD power components, the TLVR business, which accounts for over 30% of AI inductor revenue, will be directly exposed, with the ALJ initial determination expected around mid-2027 — squarely within this valuation window. The reverse scenario also exists: if respondents end with settlements or design-arounds, October's sentiment discount has room to recover.
Key evidence:
Interpretation and risks: The numbers in this thesis hold under item-by-item verification against the originals, but three qualitative adjustments: ① "annualized RMB 600 million ex-SBC" removes share-based compensation as a one-off drag — the 5.88 million restricted shares newly granted in 2026 (2.03% of total share capital) mean SBC amortization will remain elevated for the next 2-3 years; SBC is a recurring shareholder cost, and the GAAP-basis annualized figure of approx. RMB 550 million better represents sustainable earnings (both bases are presented side by side in the valuation section); ② the inventory +40.5% was not broken down by segment — if it is stockpiling for the backlog (chip inductors in undersupply), the low provision is reasonable; if concentrated in finished PV powder core products, it represents unrecognized losses; the two scenarios imply opposite outcomes, to be verified via the Q3 report's inventory detail; ③ the buyback is still small in size (executed amount equals 0.30% of total share capital), and the company's net cash is only approx. RMB 190 million — the funding balance among the capex peak (Huidong Phase I RMB 454 million + hot-pressing RMB 510 million + Phase II + Thailand) and the buyback effectively depends on the H-share issuance completing; capacity expansion, the buyback, and H-share financing are mutually conditional and cannot all be counted at their upper limits simultaneously.
Key evidence:
Interpretation: the core of the prior report's "overvalued" call was "the current price 27% above base-case fair value"; seven weeks later the stock is down 16.6% while base-period earnings were revised up (Q2 ex-SBC annualized RMB 600m vs. the prior basis), two forces pulling the current price back near the upper end of the base-case range. But the three sets of numbers blocking an "undervalued" call remain clear: ① the 38% implied CAGR from reverse DCF is ~7% above Street numbers with zero margin for error; ② consensus was cut 25.4% within 90 days and is still adjusting (sample EPS from 4 analysts at RMB 1.705 → 8 at RMB 1.425); the "stability" of the 46x forward PE is merely the offset of price decline and estimate cuts; ③ the probability-weighted midpoint is ~RMB 56.9, a ~15% premium at the current price, with a left-skewed distribution (bear median -58% vs. bull median +28%). Exit-multiple discipline: this report's base-case exit is 26–30x, with the lower bound referenced to the comparable group's 2028E forward average of ~20x and the upper bound to the historical midpoint of ~32x for A-share component growth leaders — a conservative setting; the company's own current trading multiples (59x TTM / 46x forward) are not used as the anchor — using current-price multiples to justify the current price is circular reasoning. The H-share dilution (capped at 15% of post-issue total share capital; issue size and price both unannounced) has no parameters finalized, so dilution is presented only as a sensitivity range (conservatively excluding proceeds top-up: ~RMB 46–57; including proceeds top-up: ~RMB 52–62), not as a point estimate.
| Metric | 2023FY | 2024FY | 2025FY | 2026H1 | 2026Q2 (single quarter) |
|---|---|---|---|---|---|
| Operating revenue | RMB 1.159bn | RMB 1.663bn (+43.5%) | RMB 1.802bn (+8.4%) | RMB 1.183bn (+37.5%) | RMB 694m (+45.3%, QoQ +41.7%) |
| Net profit attributable to parent | RMB 256m | RMB 376m (+46.9%) | RMB 418m (+11.3%) | RMB 226m (+17.9%) | RMB 137m (+16.7%, QoQ +54.9%) |
| Non-GAAP (recurring) net profit | RMB 239m | RMB 367m | RMB 409m (+11.4%) | RMB 223m (+18.7%) | — |
| Gross margin | 39.25% | 40.70% | 42.06% | 38.57% (-1.19pp) | — |
| Net margin (attributable) | 22.08% | 22.59% | 23.20% | 19.07% | 19.77% |
| Net operating cash flow | RMB 161m | RMB 112m (-30.3%) | RMB 347m (+209.0%) | RMB 140m (-46.5%) | — |
| Free cash flow (OCF−CapEx) | — | RMB -67m | RMB 83m | RMB -11m | — |
| Cash + trading financial assets | — | — | RMB 555m | RMB 358m (2026-06-30) | — |
| Interest-bearing debt (incl. lease liabilities) | — | — | RMB 563m | RMB 545m (ex-lease RMB 169m) | — |
| Debt-to-asset ratio | 24.06% | 24.66% | 23.00% | 24.56% | — |
| Net cash (ex-lease basis) | — | — | — | ~RMB 190m | — |
Notes: ① Parsing of the 2026Q1 quarterly report PDF failed; Q1 figures are from the company's 2026-04-24 earnings briefing (revenue RMB 489m +27.7%, net profit RMB 88.51m +20%); Q2 single quarter is back-derived from the H1 total and QoQ growth (verified); ② free cash flow is not a company-disclosed metric, computed as OCF − cash paid for long-term asset purchases; ③ cash-like assets of RMB 358m include RMB 173m of foreign-currency cash (mainly USD); ④ lease liabilities of RMB 376m are not deducted from net cash (operating basis).
Drivers of metric changes (items with YoY ≥ ±20%): ① Revenue +37.5% — growth in chip inductance revenue; with powder core capacity tight, server power supply revenue grew over 100% (interim report MD&A); ② OCF -46.5% — "cash paid for raw material procurement, staff compensation, taxes and other operating expenses grew faster than operating cash inflows" (MD&A verbatim), due to front-loaded inventory build and headcount expansion; ③ Inventory +40.5% from the start of the year — "inventory of raw materials and finished goods increased to secure order delivery" (MD&A); ④ Finance costs +673.8% — "increased FX losses on foreign-currency monetary items due to exchange rate volatility" (MD&A; H1 FX losses ~RMB 13.2m); ⑤ Admin expenses +53.5% / R&D expenses +67.1% — expanded headcount compensation and share-based payment charges (H1 equity-settled SBC of RMB 45.325m); ⑥ 2025 overseas revenue +221.3% to RMB 131m — overseas client wins and the Thailand base buildout.
2026H1 revenue RMB 1.183bn (+37.5%), net profit attributable RMB 226m (+17.9%) — profit growth significantly lagged revenue; the scissors gap comes from three items: share-based payments of RMB 45.325m (if added back, management-basis net profit growth is close to revenue growth, roughly +32%), FX losses of ~RMB 13.2m (non-cash), and depreciation from newly commissioned capacity (structural, ongoing). Momentum by quarter: Q1 revenue RMB 489m (+27.7%) → Q2 RMB 694m (QoQ +41.7%, YoY +45.3%); net profit Q1 RMB 88.5m → Q2 RMB 137m (QoQ +54.9%); Q2 net margin recovered to 19.8% (Q1 ~18.1%) — the revenue mix shifting toward higher-margin inductors (H1 inductor share ~35%, of which modular accounted for 70%+ of inductor revenue) is offsetting depreciation and expense pressure. Earnings quality is the flaw: OCF/net profit fell to 0.62, FCF turned negative, and inventory and receivables both kept rising; judging "whether the market has priced this in" must be benchmarked against sell-side consensus: Q2 ex-SBC annualized ~RMB 600m, at roughly the 13th percentile vs. the 2026E consensus of RMB 581m (the GAAP-basis gap is larger) — 2026 upside is limited but not zero; the key is whether the Huidong ramp in H2 can fill the gap. Management gave no quantitative guidance, only qualitative statements (capacity oversupplied by demand, Huidong contributing output in H2, short-term gross margin pressure with long-term improvement).
Business model: asset-heavy integrated materials-to-components manufacturing (magnetic powder → powder cores → chip inductors), capacity-driven plus Design-in customer lock-in; no subscription revenue, orders mostly short-term (the company itself says order visibility "has not significantly lengthened"); pricing power comes from mix upgrade rather than price hikes — the gross margin climb from 39.3% in 2023 to 42.1% in 2025 was driven by rising inductor/modular share; the 1.2pp pullback in 2026H1 reflects stage-specific pressure from new capacity depreciation + raw materials + utilization; the company voluntarily exited the low-price air-conditioning market (2025 annual report verbatim), and powder core ASP actually stabilized and rebounded 2.0% after order cuts.
Cash content of earnings test: OCF/net profit attributable over 2023–2026H1: 0.63 → 0.30 → 0.83 → 0.62; below 0.8 in three of four periods — cash content of earnings is unstable; FCF/net profit: -0.18 in 2024, 0.20 in 2025, -0.05 in 2026H1 — expansion-phase CapEx is persistently consuming profits; this report explicitly flags: measured on an FCF basis, the company is in an expansion phase of "profits first, cash later," and the risk signal of long-run FCF/net profit below 0.5 holds. On recurring earnings: the 2025 gap between non-GAAP and reported net profit was only 2.3% (mainly government grants of RMB 9.9m), so non-recurring cosmetics is not an issue; but the reverse problem exists — management steers the market with the "ex-SBC" basis (H1 SBC of RMB 45.325m was 20.1% of attributable profit); SBC is a recurring shareholder cost incurred every year, and the ex-SBC annualized run-rate of RMB 600m should be viewed as a ceiling, not a neutral figure.
Return on capital: ROIC ~12.2% (2025: NOPAT RMB 443m / invested capital RMB 3.62bn, this report's estimate) vs. WACC ~10.5% — only ~1.7pp above, in the "value-creating but thin buffer" zone, clearly below the strong-moat standard of long-term ROIC>15%; given that the large new capital added in 2025 (RMB 294m private placement + retained earnings) is still in early ramp, static ROIC understates steady-state returns, but the current reading does not support a "re-rating-grade" moat conclusion.
CapEx quality: total CapEx/depreciation over 2024–2026H1: 1.53 → 1.84 → 1.84, with investment intensity steadily rising; the company does not split maintenance vs. growth CapEx; from project composition (Huidong molded inductors RMB 454m, hot-pressing project RMB 510m, phase-two 66-mu site, Thailand base), spending is essentially growth-oriented while maintenance spend cannot be determined — this report does not label the company a "capital black hole" on this basis, but flags the margin pressure from four production lines commissioning in a cluster over 2026H2–2027 (the company's 5-08 minutes acknowledged depreciation pressure; Q2 COGS growth already exceeded revenue growth by 2.7pp).
Red flags and offsets: ① SBC at 20% of attributable profit with narrative steered via the "add-back" basis (see above); ② consecutive large-scale expansion reliant on external financing (2025 private placement of RMB 294m @ RMB 44.63; H-share listing in process), with net cash of only ~RMB 190m; ③ FX exposure ~RMB 300m (foreign-currency cash RMB 173m + foreign-currency receivables RMB 124m), with RMB appreciation directly eroding profits; ④ the 2025-04 safety accident at the Huizhou subsidiary killing 2 people (administrative fine RMB 0.73m) exposed management-span pressure during expansion. Offsets: no goodwill; intangibles only 1.4% of assets; high-quality customer structure (3 of the global top-5 passive component makers and 3 of the top-5 analog chipmakers are customers).
Words-vs-deeds consistency: pragmatic, conservatively inclined. Four checkable promise-delivery pairs: ① the 2025 annual report promised Huidong Phase I "to be put into use as soon as possible in 2026" → 2026-09-07 announcement of acceptance completion and large-scale production start (later than mid-year investor expectations, but delivered); ② the 2026-06 interactive platform pledge "modular share of inductor revenue above 50% this year" → H1 actual 70%+, over-delivered; ③ the 2026-08 pledge that TLVR would hold 30%–40% of AI inductor revenue for the full year → H1 already above 30%, on track; ④ the 2024 annual report's "powder core / inductor / powder three curves" qualitative framing → 2025 powder core steady growth, inductors at 25% share, powder +38.5%, direction delivered. The company gives no quantitative guidance, so absolute-value pledges cannot be checked — this is both conservative and vague; investors can only track quarterly deliveries.
Shareholder friendliness: neutral, improving. Dividends of RMB 2 per 10 shares for three consecutive years (payout ratio 22.6% → 15.4% → 13.9%, declining annually as profit grows); in 2026-08 a RMB 100–200m cancellation-type buyback was launched (first tranche 8-27; RMB 95.79m executed by 9-30 at an average price of RMB 77.77 — 19% above the current price; the buyback direction aligns with shareholder interests but sits ~16% underwater on price), the company's first cancellation-type buyback since listing; shareholder-return tools shifting from dividends alone to "dividends + buybacks" is a directional improvement. The offset is a persistent dilution history: a 6.72m-share private placement in 2025, equity incentives in 2023/2026 plus option exercises — share count rose from 199m to 408m shares in two years (including a 10-for-4 bonus issue); the H-share issuance (capped at 15%) is in process — the combination of "buying back and cancelling 0.3% while preparing a 15% issuance" means net shareholder returns remain a negative contribution.
Risk signals: ① related-party transaction — a RMB 20m acquisition of 20% of Xingan Technology held by an enterprise in which the board secretary is the executive partner, priced at net asset value (the target entity had H1 net profit of RMB 58.03m, not valued on earnings); independent directors reviewed and related directors recused — procedurally compliant, but the pricing is friendly to major shareholders; ② "orders are full, capacity utilization is very high" was repeated at high frequency (≥6 times) in June–September interactive platform replies with a uniform script — promotional intensity exceeding disclosure granularity; ③ the safety accident exposed management-span issues during expansion.
| Segment | 2026H1 revenue share | Gross margin (2025, H-share prospectus basis) | YoY | Business logic in one line |
|---|---|---|---|---|
| Metal soft magnetic powder cores | ~62% (2025 ~72%) | 39.6% | H1 +10%-plus (high PV base) | Core base with 27.1% global share; PV/ESS/server power/auto; capacity tight, low-price orders actively cut |
| Inductor components (AI chip inductors) | ~35% (2025 ~25%) | 48.5% (2026Q1 basis 49.6%) | Q1 +115.4%, backlog +400% | Second growth curve: TLVR/modular inductors at 2–3x the unit price of discrete types; supply falling short of demand |
| Metal soft magnetic powder (external sales) | ~3% | 51.0% | 2025 +38.5% | Powder-making capability spillover; import substitution + own use crowding out external sales |
Note: A-share periodic reports from 2025 onward merge the three lines into "metal soft magnetic powder products" in combined disclosure (2026H1 share 97.5%, gross margin 38.38%); the shares in the table are from the earnings-briefing IR basis and gross margins from the H-share prospectus basis — combined disclosure reduces gross margin visibility for the fastest-growing inductor segment, itself a negative for disclosure quality.
Migration of the profit engine: in 2025 powder cores contributed ~68% of gross profit (RMB 1.289bn × 39.6% = RMB 511m) and inductors ~28% (RMB 440m × 48.5% = RMB 213m) — the incumbent profit engine is still powder cores; but by 2026Q1 the inductor share of gross profit had risen to 43.5% (28.2% for full-year 2025), and with H1 inductor share at 35% and the full-year order trajectory extrapolated, inductors will likely exceed half of gross profit in 2026 — the profit engine is switching this year. The root of the gross margin structure gap (highest 51% vs. lowest 39.6%, ~11pp spread): powder and inductors are priced on formulation/process know-how, while powder cores are priced on scale + the cost curve; the gap between the powder core peer (Dongmu soft magnetics ~21–26%) and Pocco's 39.6% reflects integrated powder-making's control of cost and yield loss.
Accounting red flags (ranked by severity): ① Change in product-level disclosure basis (medium) — from 2025, powder cores/inductors/powder are merged into a single "metal soft magnetic powder products" line, removing gross margin visibility for the fastest-growing inductor business, leaving only the IR basis and the H-share prospectus (overseas disclosure is finer than domestic; ironically, A-share investors must read Hong Kong filings); ② Inventory narrative switching (medium) — the 2024 annual report cited "strengthened finished goods inventory control" (destocking -12.4%), the 2025 report switched to "reasonable stocking" (+47.1%), and 2026H1 "securing order delivery" (+40.5%) — contradictory strategy language over the same period; inventory tonnage +33.5% in 2025 far outpaced volume growth of +2.4%; ③ Credit impairment provisioning cadence (low) — RMB 14.53m provided in 2024 → only RMB 0.187m in 2025 (receivables balance RMB 650m), large provisioning elasticity; ④ Related-party acquisition pricing (low) — 20% of Xingan Technology priced on the net asset method (RMB 22.01m) rather than an earnings-based method.
Cross-period consistency: ① OCF/net profit swinging sharply 0.63→0.30→0.83→0.62, with company attributions all citing working capital timing (2025 bill maturities + grant receipts; 2026H1 front-loaded cash payments) — consistent with explanations; ② inventory growth vs. revenue growth (2024 -12.4% → 2025 +47.1% → 2026H1 +40.5%) — inconsistent with explanations (strategy language for the same period is self-contradictory, see red flag ②); ③ FX gains/losses (2024 gain RMB 2.49m → 2025 loss RMB 5.4m → 2026H1 loss RMB 13.2m) deteriorating with rising overseas revenue and a weaker USD — consistent with explanations; ④ commissioning depreciation pressuring gross margin (fixed assets RMB 715m → 979m → 1.218bn → 1.396bn; half-year gross margin 39.77% → 38.57%) — unexplained by the company (the margin decline is attributed to utilization/raw materials/new hires, with no mention of new capacity depreciation — inconsistent with the 5-08 minutes' acknowledgment of depreciation pressure).
Current market data (closing price 2026-10-19): RMB 65.51 / market cap RMB 26.72 billion / PE(TTM) 59.1x (1/3/5-year percentiles of 31%/75%/63% — earnings are at an inflection and investment-heavy stage, with TTM net profit of RMB 452 million significantly below the ex-SBC run rate of ~RMB 600 million; percentiles are for reference only, not a headline cheap/expensive signal) / PB 8.24x (80th percentile over the past 3 years) / 2026E forward PE 46.0x / 2027E 32.7x / PEG (2027E) ~0.80. Liquidity is normal (average daily turnover ~2–4% of market cap, far above the 0.1% warning threshold); no low-liquidity risk flag needed.
| Peer comparison (as of 2026-10-19) | PE(TTM) | PB | 2026H1 revenue growth | 2026H1 net profit growth | ROE (2025) | Key differences vs. Poco |
|---|---|---|---|---|---|---|
| Poco New Materials | 59.1x | 8.24x | +37.5% | +17.9% | 15.7% | Benchmark: highest AI inductor purity, gross margin of 38.6–42% leads by a wide gap |
| Sunlord Electronics | 32.9x | 4.92x | +19.7% | -8.0% | 15.66% | Platform-type chip inductor leader; has AI inductor exposure but explicitly does not supply NVIDIA directly; negative profit growth |
| NBTM New Materials | 32.3x | 4.39x | +5.1% | -23.2% | 17.26% | Powder metallurgy platform; soft magnetic gross margin ~21–26%; profits rely on foldable-phone hinge MIM |
| Mag Layers | 43.3x | 2.79x | +10.5% | +1.1% | 6.76% | Molded inductor chaser; at the "R&D introduction + small-volume supply" stage with NVIDIA |
What expectations the market has already priced in: Reverse-engineering a DCF (market cap RMB 26.7 billion, WACC 10.5%, discounting 2.2 years to end-2028, 30x exit multiple) yields: the current price implies 2028E net profit of ~RMB 1.11 billion, i.e., a 2026–28 profit CAGR of ~38%. Equivalently — after consensus extrapolation of ~RMB 1.04 billion for 2028 (2027E of RMB 818 million plus another +27%) is fully delivered, the market still requires about 7% more in earnings, or an exit multiple of ~32x. An intuitive anchor: the management-set 2030 equity incentive target for employees is net profit of RMB 1.0 billion — the current price is betting the company hits this line two years early (2028). To answer the question "the price requires the company to do X, while reality is Y": reality is a Q2 ex-SBC annualized RMB 600 million (GAAP basis: RMB 550 million), order backlog up +400%, and the Huidong ramp still underway — the gap between requirement and reality is not insurmountable, but there is no buffer left for failure.
Three-tier value (EPV): Asset value (book equity attributable to shareholders) ~RMB 7.95/share — a floor reference; EPV no-growth value on an ex-SBC basis is RMB 14.5/share (Q2 ex-SBC and FX annualized ~RMB 600 million; FCFF bridge: D&A ≈ maintenance capex, expansionary working capital excluded, WACC 10.5% + net cash of RMB 0.51/share), or ~RMB 10.3/share on GAAP basis (based on 2025 net profit of RMB 418 million) — the two measures cover ~22% / ~16% of the current price respectively, with ~78% of the current price supported by growth options (this report's methodology); the growth option of ~RMB 51/share represents prepayment for the ramp of AI inductors + AI power supply powder cores. Conclusion: the current price is mainly supported by the growth tier and is highly sensitive to "market share × ASP × gross margin" — this is the typical valuation structure for a company at a structural inflection, not the deep-value pattern of "the market pricing only zero growth." EPV is a downside floor, not a final verdict; whether growth deserves to be paid for is tested via scenarios.
Three scenarios and odds (current price RMB 65.51; direction and magnitude noted):
| Scenario | Probability | Fair value range | vs. current price | Decisive factors |
|---|---|---|---|---|
| Bear | 25% | RMB 25–30 | -54% ~ -62% | 337 exclusion order broadened to hit customers' shipments + 2027 cloud capex growth falling below 20% + competitors grabbing share pushing inductor growth below 30%: 2028E net profit RMB 700–760 million × 18–20x (anchored to TDK/Murata's historical 12–18x plus A-share downside troughs, growth premium zeroed out) |
| Base | 50% | RMB 52–64 | -21% ~ -2% | Ramp delivers in line with consensus: 2028E net profit RMB 1.00–1.08 billion × 26–30x (anchors: comparable group 2028E forward average of 20x as the lower bound, A-share component growth leaders' historical midpoint of 32x as the upper bound, 2028 PEG ~1.0–1.2), discounted 2.2 years |
| Bull | 25% | RMB 79–89 | +21% ~ +36% | Rubin Ultra 800V HVDC full rollout + share rising to 13–15% + price increases continuing: 2028E net profit RMB 1.18–1.26 billion × 34–36x (conservative multiple for a scarce name in an AI boom cycle; still growing 25%+ beyond 2028) |
The probability-weighted midpoint is ~RMB 56.9, about 15% above the current price; the distribution is left-skewed — bear-case median implies ~58% downside, bull-case median ~28% upside, so the odds are asymmetrically negative. Probability sensitivity: if bull/bear probabilities each shift 5pp (bull 30%/bear 20%), the midpoint rises to ~RMB 59.4 and the premium narrows to ~10% — the conclusion of "reasonably expensive, no margin of safety" holds under probability perturbations. External anchor comparison: Southwest Securities, the most bullish sell-side (2026-10-11), forecasts 2026–28 net profit of RMB 634/904/1,247 million; its 2028E of RMB 1.247 billion × 26–30x discounted corresponds to ~RMB 64–74 — this report's base range (RMB 52–64) is based on the consensus extrapolation of RMB 1.00–1.08 billion for 2028E and does not adopt Southwest's single-firm upper limit; the most pessimistic named sell-side, Huayuan Securities (2026-05), at 560/710/870 million implies ~RMB 35–44, which is above this report's bear case (RMB 25–30) — because the bear case combines a broadened 337 exclusion order + capex below 20% + share loss, a triple-stress combination that is a stress test rather than a replication of sell-side floor estimates.
H-share dilution sensitivity (none of the three parameters has been formally announced; ranges only): issuance of up to 15% of post-issue total share capital (~71.97 million shares); conservatively excluding dilution offset from proceeds, the base case is ~RMB 46–57; with a 15% new-share issuance (assuming an issue price of RMB 55, raising ~RMB 3.36 billion), including offset it is ~RMB 52–62. Buyback-and-cancellation (capped at RMB 200 million; RMB 95.79 million already executed) can offset at most ~0.5% of share capital — an order of magnitude that does not constitute a primary dilution hedge.
House earnings forecast (anchor for next results reconciliation):
| Period | Revenue | Net profit attributable | Key drivers |
|---|---|---|---|
| FY2026E | RMB 2.6–2.8 billion (+44%~55%) | RMB 550–600 million (~RMB 600–640 million ex-SBC) | Q3/Q4 QoQ +8%~18% / +5%~12% on Q2's RMB 694 million; full-year inductors RMB 950 million–1.05 billion (H1 already RMB 414 million), powder cores RMB 1.65–1.75 billion; H2 net margin 19–21% (suppressed by SBC + depreciation of new capacity) |
| FY2027E | RMB 3.3–3.8 billion | RMB 760–880 million | Full-year Rubin volume + 800V HVDC ramp: inductors RMB 1.4–1.7 billion (implying 11–13% share); ASP increase converging to single digits, offset by depreciation from new capacity coming online vs. scale effects |
Methodology: based on the Q2 run rate + the Huidong ramp; the lower bound of this forecast (H2 QoQ +20–25%) deliberately leaves a 5–8% safety buffer versus the consensus-implied H2 QoQ of +57.5% — consensus has been cut 25.4% within 90 days and implies seasonality notably stronger than actual 2025, so the downgrade cycle has yet to bottom. Third-party comparison: this forecast's 2026E of RMB 550–600 million vs. consensus RMB 581 million (range brackets it) vs. management's incentive target of RMB 530 million (a floor backstop); 2027E of RMB 760–880 million vs. consensus RMB 818 million (the upper half of this report's range overlaps with the market; the lower bound leaves margin for 337 and competitive share pressure).
Valuation conclusion: Upper end of reasonably expensive (fair), no margin of safety. The base-case fair value is RMB 52–64 (target price range); quality and price should be judged separately — the quality is a scarce-in-A-shares "globally #1 material platform by share + an already-delivered second AI curve" (leading all three comparables across gross margin, growth, and AI purity), while the price sits above the upper half of the base range and ~15% above the probability-weighted midpoint, with odds not yet turned positive. What the pullback has digested is valuation, not the thesis; if fundamentals continue to deliver while the stock falls back into the RMB 52–61 range, the odds would turn positive — that would be the better decision point, not the current price.
Industry definition and market size: The vertical chain in which Poco truly competes is "alloy soft magnetic materials — metal soft magnetic powder cores — AI chip inductors," distinct from ferrite soft magnetics (small/mid-current consumer applications, being displaced by high-current metal soft magnetics) and ordinary chip inductors (consumer electronics). Market sizing should be presented on dual tracks: ① CIC (C灼识 Consulting, advisor engaged for the company's H-share prospectus) methodology — the global alloy soft magnetic powder core market of ~RMB 4.8 billion in 2025 → ~RMB 9.8 billion in 2030 (CAGR 15.5%, with powder cores for AI compute infrastructure CAGR of 39.5% the fastest-growing downstream); the global AI chip inductor market of ~RMB 5.8 billion in 2025 → ~RMB 26.9 billion in 2030 (CAGR 36%); ② the broader methodology cited by Industrial Securities (2026-06) — AI chip inductor TAM of ~RMB 2.5 billion in 2025 → ~RMB 44 billion in 2030 (implied CAGR ~77%, far more aggressive than CIC; the difference lies in whether ASIC/DDR/optical modules and edge devices are included) — the methodology must always be noted when citing. Reference point: the global inductor market of ~USD 6.6 billion in 2025 → ~USD 9.1 billion in 2032 (QYResearch, CAGR only 4.9%) — the essence of industry growth is structural upgrading (ferrite → alloy, discrete → modules) rather than aggregate growth; this is the key to understanding the elasticity in Poco's valuation. Historical explosive growth is verified: the company's AI chip inductor revenue grew from RMB 77.5 million in 2023 to RMB 439.5 million in 2025 (CAGR 138%, H-share filing).
Quantified chain of the structural demand inflection (this report's core industry judgment): The exogenous driver is NVIDIA GPU platform power leaps (H100 ~700W → Rubin ~2,300W per chip; VR200 racks standard with 110kW power shelves), forcing a triple switch in power architecture — materials from ferrite to metal soft magnetics (already happening since H100), topology from discrete to VPD/TLVR, and rack power distribution from 54V to 800V HVDC (NVIDIA's 800V HVDC Power Rack completed stocking in 2026Q3; Delta released an 800VDC in-row solution for Vera Rubin on 10-02, and TrendForce confirmed Rubin Ultra will fully adopt 800VDC in 2027). Usage chain: chip inductors per compute tray of ~140–150 on Blackwell → ~340–360 on Rubin (~2.3–2.5x); specialty inductors per rack of ~4,800 on GB300 → ~9,000–11,000 on Rubin (~2x) — these unit-count figures are supply-chain teardown secondhand citations (Xueqiu/Zhihu posts 2026-06/09), not an official NVIDIA BOM; this round of independent verification found no primary source, so treat as directional reference only. The verifiable hard anchors are the VR200 NVL72 rack BOM value of ~USD 7.8 million vs. GB300's ~USD 4.0 million (Huxiu-cited teardown), a near-2x difference in rack value. Penetration pace: materials penetration has passed 0→1; architecture penetration is underway (NVIDIA still relies mainly on discrete power delivery; VPD/TLVR is being introduced with Blackwell/Rubin, and Rubin Ultra moves fully to 800V HVDC in 2027); Taiwan's Cincon's TLVR orders are full and capacity tight, pushing leading power module makers to engage domestic inductor makers — the opening of the domestic-adoption window is an industry-level tailwind for Poco's share gains. Cloud capex is the demand master valve: the four major cloud providers' 2026 guidance totals ~USD 700–730 billion, up ~77% YoY (2026Q2 earnings season basis); 2027 guidance has turned qualitative (Microsoft "will grow," Google "significant growth," no numbers given) — a decelerating growth slope is the biggest industry variable for 2027, and Moody's has warned that tech giants' AI capex is eroding free cash flow (~USD 785 billion in 2026).
Supply chain and value distribution: Upstream iron/silicon/nickel powders and copper are fully supplied commodities with no choke points; the company's key lies in in-house magnetic powder production (gas atomization + insulation coating), keeping the materials step in-house — strong bargaining power over upstream. Midstream comprises two process lines (powder core forming, and copper-iron co-fired CFS inductor lines). Value distribution (2025 gross margin by product, H-share filing): alloy soft magnetic powders 51.0% > AI chip inductors 48.5% > powder cores 39.6% — high margins reside at both the materials and devices ends, and the company internalizes the entire chain, a structure hard for peers to replicate (NBTM soft magnetics ~21–26%, Mag Layers 22.9%); low-loss formulations reduce customers' copper wire usage, amplifying the value of the company's solution when copper prices are high. Downstream: powder cores are 95.7% direct sales, top five customers 46.1% (largest 13.5%); inductors involve co-development with deep overseas customers (the market broadly presumes entry into NVIDIA's GPU power ecosystem, unconfirmed by name by the company; the 2026-05-08 minutes self-identify core customers as MPS, Flex, etc.).
Supply-demand and competitive landscape: Global powder core CR5 = 63.2% (CIC, 2025 revenue basis): Poco leads at 27.1% by a wide gap (13.5pp ahead of #2) → Chinese peers 13.6% → Korean makers 10.5% → US makers 8.4%/3.6% (anonymously disclosed in the prospectus; the market broadly speculates Chang Sung-group and Magnetics-group) — capacity expansion is concentrated among leaders and competition is easing (ASP actually rose 2.0% after the company cut low-priced orders). Global AI chip inductor CR5 = 72.5%: overseas/Taiwan's four at 33.8%/10.6%/10.4%/10.1%, with Poco at 7.6% ranked fifth — on the inductor side it is a chaser, not a leader, as the top four have deep accumulated strengths in materials, device design, and customer qualification; Cincon's TLVR orders are full, and Sunlord/Mag Layers completed AI inductor price increases of 5–30% and capacity expansion by mid-2026. Supply-demand is structurally bifurcated: powder cores are generally loose (PV demand falling, but high-end AI power powder cores are tight); high-end AI inductors are in tight-to-short supply (industry price increases of 45–60% since early 2026, over 100% for high-end; company inductor ASP +28.1% in Q1) — after capacity comes online in earnest in 2027, the inductor side will most likely shift from "price competition amid shortage" to a fight for market share; this is the basis of this report's assumption that 2027 ASP growth converges to single digits. Entry barriers lie in know-how and qualification (formulations + powder production/coating processes + copper-iron co-firing yields + long design-in cycles); scale of capex is secondary.
Cycle and regulation: Divergent dual cycles — the AI power chain is in early-to-mid upcycle (VR200 NVL72 first shipments in 2026Q3; Ming-Chi Kuo expects rack shipments of ~5,000–7,000 in 2H26; 800V HVDC stocked in 2026Q3 with Rubin Ultra volume in 2027); PV powder core demand is in a clear downcycle (2026H1 installs of 72.07GW, -66% YoY; Jan–Aug -57.9%; CPIA forecasts the full year at -24%~-43%, the first decline since 2020; however, August alone turned positive at +50% YoY — a bottoming signal pending confirmation). Regulation, three points: ① against the backdrop of US tariffs, the Thailand base serves as the pivot for overseas delivery and tariff avoidance; ② H-share filing supplementary material requirements (energy-intensive designation, incident characterization, etc.) are procedural friction with a pushed-back timeline; ③ the USITC 337 investigation is an industry-level regulatory event — the respondents are power module/VPD system makers rather than inductor component makers, but supply-chain risk appetite has materially cooled (broad declines in A-share AI hardware in October).
Company's industry position: "Global powder-core leader by a wide gap + a fifth-place chaser rapidly ramping in AI inductors." Share trends: powder core share stable (27.1%, stabilizing prices by cutting low-priced orders); inductor share rising (2026Q1 inductor revenue growth of +115.4% significantly outpacing the implied industry growth; 2026 share expected to rise above 10%; sell-side 2026–28 inductor revenue of RMB 1.09/1.68/2.41 billion implies continued gains). Moat sources: vertical integration (51% gross margin positioning on materials) + powder formulation iteration (FeSi generations 1–5 / FeNi / CFS copper-iron co-firing) + design-in customer lock-in + multi-site delivery (Huizhou / Heyuan / Huidong / Thailand). Both sides must be presented together: on the share metric, the company's self-claimed "global #1 in alloy soft magnetic powder cores" (CIC) ranks differently under third-party broader measures (e.g., magnetic components including ferrites overall), and the inductor side's 7.6% lags the top four's combined 64.9% by a wide margin — the "leader" label holds only on the powder-core metric; on inductors the narrative should be "a chaser climbing from fifth place," and whether that climb materializes depends on the 2027 share battle, not on industry aggregate growth.
① 337 investigation transmission (medium probability): Vicor has a record of winning and enforcing ITC rulings (NBM exclusion order + PTAB patent confirmations); core customers Delta/MPS/Flex are all respondents; if the exclusion order covers VPD components, the TLVR business — over 30% of AI inductor revenue — is directly exposed; ALJ initial ruling expected ~mid-2027. Watch points: USITC target date setting in late November, respondents' litigation strategies, and the company's order commentary in the Q3 report. ② AI capex slope (medium probability, thesis-breaking level): if 2027 cloud capex growth falls below 20%, inductor revenue slope assumptions face systematic downward revision, causing a double kill on valuation and earnings (neutral scenario ~RMB 44–50). ③ H-share issuance (high probability of delay/low probability of shelving): timeline pushed back after the 9-30 supplementary materials; if completed = dilution + a discount anchor; if shelved = loss of offshore financing and a tighter funding chain for expansion (net cash only ~RMB 190 million) — costs on both sides. ④ Earnings quality (low-to-medium probability): inventory up +47%/+40% over two years while the provision rate is only 0.38%; if powder core inventory's net realizable value declines, provision elasticity is large; OCF/net profit persistently weak. ⑤ 2027 competition (medium probability): after Cincon/Sunlord/Mag Layers capacity comes online, AI inductor annual price declines may exceed the customary 5–10%; combined with PV drag on powder cores, a gross margin falling to 35% corresponds to net profit of -18%. For complete trigger conditions and monitoring methods for these risks, see the tracking table in Section 7.
Overall assessment: Neutral (Wait-and-See), confidence 0.55, time horizon 6-12 months. In terms of investment structure, this is a classic case of "right direction, wrong price": the fundamental inflection (AI inductor volume ramp, Huidong facility coming online, orders +400%) and the stock price direction (-17% drawdown) moved in opposite directions over the past seven weeks, pulling the valuation from the overvalued zone back to the upper edge of fair value — but a premium of roughly 15% above the probability-weighted central value, a left-skewed scenario distribution, and three major pending events (Q3 earnings report, Section 337, H-share pricing) collectively mean the current price is still not a good decision point. Strategically: existing holders may continue holding until Q3 earnings validation (stop-loss level below), while non-holders should wait for the RMB 52-61 range or a Q3 earnings beat (single-quarter net profit attributable to parent ≥ RMB 178 million) before reassessing.
Calibration note for self: The confidence level assigned to this judgment references the full-database historical calibration (directional hit rate of roughly 42%, with judgments where the target price diverges from the current price by >30% accounting for about half) — this report's divergence between current price and the benchmark central value is roughly 15%, falling in the low-divergence bucket. Direction realization (sideways drift back to central value vs. event-driven breakout) depends on three high-variance events; the 0.55 confidence level is not above the reliability range of the historical base rate and does not constitute a strong signal.
Monitoring checklist (catalysts and counter-evidence conditions, all under machine monitoring):
| Event/Condition | Timing | Validation Content |
|---|---|---|
| Q3 earnings disclosure | 2026-10-28 (scheduled, changed from 10-22) | Single-quarter net profit attributable to parent ≥ RMB 172 million (75% progress on incentive target) / ≈ RMB 178 million (consensus-implied H2 average); whether inductor revenue share can rise from 35% to 40%+; gross margin stabilizing at 38%+; OCF/net profit ratio recovering; inventory structure and order disclosure |
| Section 337 investigation milestones | Target date setting around late November; preliminary ruling mid-2027 | USITC schedule, Delta/MPS response and settlement, any anomalies in company orders |
| H-share filing and pricing | 2026Q4-2027Q1 | Filing approval, hearing, issuance size and discount (discount >20% triggers revaluation) |
| VR200/Rubin volume ramp | 2026Q4-2027 | Realization of 5,000-7,000 rack shipments in 2H26, Delta/Lite-On monthly revenue, TLVR lead times and pricing |
| Buyback execution | Monthly progress | Whether it reaches the RMB 200 million cap, timing of cancellation completion |
| Price conditions | Ongoing | Fall below RMB 52 (lower bound of base case, odds turn positive, revaluation-driven allocation); rise above RMB 84 (bull-case central value, verify VPD/share beat assumptions) |
Counter-evidence conditions (trigger re-examination of investment thesis upon occurrence): AI inductor revenue growth below 50% for two consecutive quarters; overall gross margin below 36% for two consecutive quarters; OCF/net profit attributable to parent below 0.5 for two consecutive periods with persistently negative FCF; full-year 2026 net profit attributable to parent below RMB 550 million; H-share pricing at a discount of more than 20% to the A-shares, or issuance using the full 15% with tepid subscription; adverse Section 337 ruling covering customer VPD shipments; 2026 new PV installations coming in below 180GW.
This report is an update review (Issue 2), anchored on the closing price of RMB 65.51 on 2026-10-19; the buyback progress (as of 9-30) and H-share filing supplementary materials mentioned in the report were cross-verified via news sources, with official announcements pending company disclosure. Data sources: company 2025 annual report, 2026 interim report, 2026-09-07 base investment progress announcement, investor relations activity records, H-share draft prospectus (as cited by Southwest Securities), National Energy Administration, CPIA, USITC, CIC (Zhuoshi Consulting), and East Money consensus estimates.