This is the latest installment in our financial report series tracking the automotive electronics components sector for Q3.

Huguang Shares reported operating revenue of 5.368 billion yuan for the first three quarters of 2026, down 8.05% year-on-year. Net profit attributable to parent was 83.9 million yuan, down 80.25% year-on-year, while net profit after deducting non-recurring items came in at 60.18 million yuan, down 85.34% year-on-year.

Third-quarter single-quarter revenue was 1.843 billion yuan, down 16.55% year-on-year.

In the same period last year, the company posted first-three-quarter revenue of 5.838 billion yuan and net profit attributable to parent of approximately 425 million yuan.

This year, revenue is down 470 million yuan, and net profit attributable to parent is down about 341 million yuan. The net margin attributable to parent fell from 7.28% to 1.56%. Operating costs for the first three quarters were 4.732 billion yuan, down about 3.98% year-on-year—a slower decline than revenue. Consolidated gross margin fell from approximately 15.59% in the same period last year to about 11.85%.

Part 1

Revenue Down 8%, Profit Down 80%: Costs Falling Slower Than Revenue

Operating costs fell 3.98%, while the revenue decline was larger.

Based on first-three-quarter revenue, each one-percentage-point decline in consolidated gross margin translates to roughly 53.68 million yuan in gross profit; 3.74 percentage points corresponds to about 201 million yuan.

On the cost side, copper conductors, insulation materials, terminals, connectors, sheaths, assembly, testing, and synchronous delivery around OEMs are itemized one by one. When vehicle customers push for price cuts, selling prices move first; when bulk raw materials such as copper rise, procurement costs move first. The settlement timing does not match.

Raw material procurement is stocked up in advance. OEM settlement prices are executed according to contracts, vehicle models, or annual negotiations, and the wiring harness maker bears the price difference in between first.

R&D expenses were 287 million yuan, compared with 210 million yuan in the same period last year, up 36.7%. Administrative expenses were 197 million yuan, compared with 157 million yuan in the same period last year, up about 25.0%.

Revenue is contracting. Engineering investment, R&D talent, and management resources continue to increase, while vehicle customer sales prices remain under pressure and bulk raw materials such as copper are rising.

In the wiring harness lists for electric vehicles and smart cars, power batteries, high-voltage power distribution, charging interfaces, and the three-electric system are included. Cameras, radars, displays, and zone controllers further add data connection demand.

After a vehicle model is designated, tooling investment, PPAP quality verification, ramp-up, and yield improvement must all be completed.

Model changes, configuration adjustments, and delivery location changes all require engineering resources to be redeployed.

High-voltage wiring harnesses have higher requirements for insulation, shielding, voltage withstand, and airtightness, while high-speed data connections also require signal integrity control, so development and validation cycles are lengthened accordingly. Per-vehicle value must first cover the extra labor hours and equipment.

Part 2

From Designations to Mass Production: Connectors and the Tunisia Production Line Are Being Rolled Out Together

The designation list in the semi-annual report includes Seres G19, L97, and E68 high- and low-voltage wiring harnesses, Geely E281 high-voltage wiring harnesses, and NIO Qinling and Hercules low-voltage wiring harnesses.

Some Chery high-voltage and charging port wiring harnesses and FAW-Volkswagen ABS wiring harnesses are also in this column.

The mass production column includes Leapmotor C10 and C16 high-voltage wiring harnesses, multiple Seres projects, and NIO ROSA low-voltage wiring harnesses.

Some Chery projects, Mercedes-Benz PA low-voltage wiring harnesses, and Zeekr projects are advancing in the same period. When new projects replace old ones, per-vehicle value, engineering expenses, and annualized delivery volume determine how quickly this batch of orders amortizes equipment and labor.

The company is extending its traditional wiring harness capabilities into connectors. High-voltage connectors cover 40A to 600A, with newly added products adapted to 800V platforms. FAKRA, Mini-FAKRA, and automotive Ethernet connectors are laid out together. It has moved from merely supplying wiring to customers to also supplying some key connectors.

Technical segments have an extra layer of bargaining space compared with pure processing segments, and the negotiable portion in quotations changes accordingly.

In March, the company approved a planned investment of no more than 37.5 million euros to build an automotive wiring harness production base in Tunisia. The semi-annual report expected gradual production in October of that year.

Tunisia is close to European OEMs and the local supporting network, which can shorten cross-continental logistics and delivery cycles.

Land, recruitment, customer verification, production line transfer, and quality system construction require investment first.

The domestic business is also expanding beyond automobiles. The semi-annual report disclosed batch deliveries of wiring harnesses to overseas commercial lawn mower-related projects, with three projects cumulatively in batch production.

Summary

Huguang is working hard. Of course, that's just how the business is. There is really no way around it if it does not make money.