Estun Automation: Deep Losses as New Energy Customers Cut Capital Expenditure

Estun’s preliminary losses of CNY 65 million-CNY 85 million in the first half translates to CNY 72 million-CNY 92 million losses in the second quarter, falling short of our expectations and market consensus. Estun attributed the losses to declining sales and margin contraction due to a steep decline in shipments to new-energy industries, especially solar. We think the challenge will persist over the next two years, considering significant overcapacity in those industries. As a result, we slashed our 2024 earnings estimate by 95% to CNY 13 million, which barely breaks even. We also reduced our earnings estimates by 17%-55% for 2025-28. As a result, we lowered our fair value estimate by 11% to CNY 13.30. The shares fell 4% after the preliminary result and closed 2% below our fair value estimate on July 11. We suggest investors wait for a better entry point.