Goldman Sachs Huali Industrial Group (300979) Earnings Review: Broad-Based 1Q26 Miss and Prudent Full-Year Outlook; Neutral
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Goldman Sachs reviewed Huali Industrial Group's (300979.SZ) first-quarter results, noting a broad-based miss across revenue, gross margin, and net profit. The bank highlighted that management provided its inaugural full-year 2026 revenue guidance of approximately ±5% year-over-year, falling below Goldman's prior forecast of +3.5% and the Wind consensus estimate of +7%.
First-quarter revenue declined 19% year-over-year to RMB 4.315 billion, missing estimates by 14%. This weakness was driven by cautious brand purchasing—most notably from Converse—and shipment delays for certain high-ASP products. Consequently, first-quarter net profit plummeted 50% to RMB 384 million.
Goldman Sachs analysts emphasized that Huali's margin contraction is primarily structural rather than purely cyclical. This pressure stems from ongoing diversification across production bases and customer portfolios, compounded by operational deleveraging and new factory ramp-up inefficiencies.
Reflecting the ongoing order softness and declining profitability, Goldman Sachs trimmed its 2026–2028 net profit forecasts by 10–14%. The twelve-month target price was correspondingly reduced from RMB 44 to RMB 38, based on 15 times the 2026E price-to-earnings ratio.
The Neutral rating is maintained. With the stock currently trading at RMB 41.43, the revised target implies a potential downside of 8.3%. Key upside risks include stronger demand from existing clients and smoother factory ramp-ups, while downside risks feature global demand weakness, slower capacity utilization, and tariff fluctuations.