Estun Automation Earnings: Revenue Growth Resumes, but Margin Contraction Disappoints

We maintain our fair value estimate at CNY 11.30 following Estun’s mixed third-quarter results. Although revenue grew 22% year on year, gross margin declined by 291 basis points to 30.3%, likely due to the lingering effects of price competition from the first half of the year. We think the shares are overvalued, trading at a 30% premium to our fair value estimate and 127 times our projected 2025 price/earnings ratio. While we believe Estun will benefit from domestic substitution and gain market share from foreign industrial robot manufacturers, we think the positive long-term outlook is already reflected in the current share price.