JPMorgan: Estun Automation - Margin Expansion and Cash Generation Support Higher-Quality Growth, Target Raised with Q1 2026 Preview
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Following a recent fireside chat with Estun Automation's management, JPMorgan updated its model to incorporate 2025 results and the latest company guidance. The firm highlights that gradual progress in operational discipline, margin expansion, and cash generation is translating into stronger earnings visibility and a clearer path for high-quality growth. Analysts raised their 2027 and 2028 earnings estimates by up to 20%, currently sitting about 8% above market consensus, and project a compound annual growth rate for profit of roughly 110% during the forecast period.
JPMorgan increased its price target from RMB 27 to RMB 28 with a June 2027 target date, offering approximately 35% upside from the current share price, while maintaining an Overweight rating. For Q1 2026, net profit is expected to surge about 130% year-over-year to around RMB 30 million.
Management's confidence stems from abandoning low-margin automotive orders, turning around the Cloos business, and achieving a record operating cash flow of RMB 5.07 billion in 2025. The 2026 guidance targets RMB 6 billion in revenue, gross margin around 30%, and net profit margin expanding to 5%. JPMorgan's model assumes a more conservative 4.0% net profit margin for 2026, reflecting economic volatility and significant overseas exposure, leaving clear upside potential.