The market has overly high expectations for the robotics business! Goldman Sachs has downgraded the rating of "Sanhua"

Due to the market's overly high expectations for humanoid robot business, the A-share rating of leading component manufacturer Sanhua Intelligent Controls has been downgraded by Goldman Sachs. The investment bank believes that while the company's long-term potential remains, its recent significant stock price increase has overly reflected optimistic sentiments that are difficult to achieve in the short term.

According to Wind Trading Desk, Goldman Sachs released its latest report on November 2, downgrading Sanhua Intelligent Controls' rating from "Buy" to "Neutral." Goldman Sachs analysts pointed out that despite the market's enthusiasm for the humanoid robot business, Tesla has further delayed the release and mass production timeline of the Optimus Gen 3 robot during its recent earnings call, creating uncertainty regarding short-term revenue contributions.

Previously, driven by Tesla's release of the "Master Plan IV" and market rumors that "Tesla placed a 5 billion yuan order for humanoid robots with Sanhua Intelligent Controls," the A-share price of Sanhua Intelligent Controls has soared by 51% since September 2.

Goldman Sachs believes that the current stock price has already factored in overly aggressive assumptions about robot shipments, which are unlikely to be realized within the next 12 months. The firm has set a 12-month target price of 40.9 yuan for Sanhua Intelligent Controls' A-shares, indicating an 18.1% downside from the price at the time of the report's release. Meanwhile, Goldman Sachs maintains a "Buy" rating for Sanhua Intelligent Controls' H-shares.

Valuation has overdrawn the future, robot shipment expectations are unrealistic

Goldman Sachs' core argument is that the market's valuation of Sanhua Intelligent Controls in the humanoid robot field is "too high and too early." According to Goldman Sachs analyst Jacqueline Du's calculations, the current market capitalization of Sanhua Intelligent Controls' A-shares implies a valuation equivalent to the need for shipment of 900,000 to 2 million humanoid robots in the future (assuming Sanhua occupies 30% to 70% of the market share in actuator assemblies).

This expectation appears particularly aggressive. Goldman Sachs believes it is premature to assess Sanhua Intelligent Controls' actual opportunities before seeing clear product performance and order evidence for the Optimus Gen 3.

Goldman Sachs emphasized in the report that Tesla's previously announced target is to achieve a shipment of 1 million Optimus robots by 2030. Additionally, the latest news from Tesla has cooled the market's optimistic sentiment. According to Tesla analyst Mark Delaney's report, the Optimus Gen 3 robot, originally scheduled to debut by the end of 2025, has had its product launch postponed to the first quarter of 2026 (February to March), and mass production has been moved from early 2026 to the end of 2026.

Slowing Growth in Main Business, Facing Short-term Pressure

As the outlook for the robotics business remains unclear, Sanhua's traditional main business may face pressure for slowing growth in the next two to three quarters.

Goldman Sachs, citing its China consumer goods analyst Nicolas Yi's report, pointed out that due to the high base effect and the government's control over the pace of subsidies for replacing old home appliances, Sanhua's HVAC (heating, ventilation, and air conditioning) components business will face sustained growth pressure in the fourth quarter of 2025. Meanwhile, its China automotive industry analyst Tina Hou expects that the production growth rate of new energy vehicles (EVs) in China will slow from 37% in 2025 to 19% in 2026 and 2% in 2027. This will affect Sanhua's electric vehicle thermal management business, with Goldman Sachs predicting that the year-on-year growth rate of this business will remain at a moderate level of 12%-15% in the coming quarters.

Despite Goldman Sachs' cautious view, the market's enthusiasm for upstream home appliance companies like Sanhua entering the humanoid robot sector is not unfounded. According to China Household Appliances Network, Sanhua has listed "bionic robot electromechanical actuators" as a strategic emerging business in its annual report and has laid out plans in its two major bases in Hangzhou and Mexico.

Reassessment: Upgrading Earnings Forecast but Downgrading Rating

Notably, while Goldman Sachs downgraded its rating, it actually raised its earnings per share (EPS) forecast for Sanhua for 2025-2030 by 4%-8%. This move is mainly attributed to the company's outstanding cost control capabilities demonstrated in its third-quarter 2025 financial report, which Goldman Sachs believes is a sustainable factor.

Based on a sum-of-the-parts (SOTP) valuation method for core and humanoid robot businesses, Goldman Sachs raised Sanhua's target price-to-earnings (P/E) ratio from 21 times to 25 times. In this model, its core business is assigned a P/E ratio of 20 times, while the promising humanoid robot business is assigned a P/E ratio of 40 times.

Although long-term profitability and valuation models have improved, due to the stock price rising too quickly in the short term, significantly exceeding the target price based on fundamental analysis, Goldman Sachs ultimately assigned a "neutral" rating to Sanhua's A-shares. This reflects the importance for investors to distinguish between long-term narratives and short-term realities