JPMorgan has released a research report updating its model for Zhejiang Sanhua Intelligent Controls Co., Ltd. (02050), suggesting that market concerns over the visibility of its new business segments and capacity expansion are overly pessimistic.

The bank points out that global warming trends and AI-driven liquid cooling heat dissipation demand, combined with the robotics business transitioning from technical validation to commercialization, are expected to serve as structural growth drivers in the coming years. JPMorgan reiterates its "Overweight" rating on both the H-shares and A-shares, while lowering the H-share target price from HK$42 to HK$38 and trimming the A-share (002050.SZ) target price from RMB 60 to RMB 51.

The report highlights that management positions robotics as the company's third growth curve, with US customers currently accelerating delivery timelines. Capacity construction is already underway and has received positive feedback from key clients. The liquid cooling heat dissipation business is also ramping up rapidly, with data center liquid cooling revenue growing over 50% year-on-year in the first half, reaching roughly RMB 1 billion in sales, which accounts for approximately 10% of the refrigeration components segment. Deliveries have been made in volume to cloud service providers in North America, mainland China, and tier-one clients in Taiwan. The product portfolio spans valves, pumps, sensors, and cold plates, with certain products reaching unit values between RMB 50,000 and RMB 100,000.

JPMorgan forecasts approximately 25% earnings growth for Zhejiang Sanhua Intelligent Controls Co., Ltd. next year, with a projected compound annual growth rate of around 20% for the 2026-2028 period. In the core automotive business, first-half revenue reached RMB 6.5 billion, up 10% year-on-year, covering approximately 70% of new energy vehicle models in the market, while maintaining a segment net profit margin of around 14%.

The home appliance and refrigeration business generated first-half revenue of RMB 10.5 billion, a 0.5% year-on-year increase, with gross margins stable at approximately 28%. Management emphasized that overseas sales now account for over 40% of total revenue, with copper price-linked pricing mechanisms and material substitution strategies implemented to mitigate commodity price volatility.