Hongfa Technology: 3.464bn Relays, a 32% Top Line That Yielded CNY 114m of Cash, and CNY 34.73 at the Hold-Band Floor

The gross-margin pressure did not begin in 2026. In 2025, relay revenue rose 23.64% while relay cost rose 28.28%, and relay gross margin fell 2.33 points to 35.66%. Raw materials accounted for 78.06% of relay production cost, up from 75.04%, while raw-material expense increased 33.44%. That is unusually useful disclosure, because it ties the abstract “commodity risk” straight to the income statement.

Copper and silver were hostile inputs. Copper, one of Hongfa's disclosed core raw materials, reached more than US$14,000 a tonne on the LME in January 2026 and was still around US$13,341 cash settlement on 30 June; silver also experienced an extraordinary price spike during early 2026. Hongfa explicitly identifies copper and silver as material inputs and warns that profitability is exposed when price increases cannot be passed through to customers. Its filings do not disclose a commodity-hedging program large enough to isolate an exact copper- or silver-to-margin bridge, so attributing all CNY172m of H1 gross-margin shortfall to metals would be false precision. The evidence supports material-cost pressure as a major contributor, but not a precise percentage allocation.

Price cutting is not the obvious explanation either. Hongfa sold 3.464bn relays in 2025 and generated CNY15.703bn of relay revenue. That implies roughly CNY4.53 of relay revenue per unit, versus approximately CNY4.05 on the prior-year revenue and shipment figures, an increase of about 11.8%. It is not a clean ASP series: high-voltage automotive relays and small signal relays have radically different unit prices, and product mix can move the implied number sharply. It still argues against a simple story in which Hongfa defended share by cutting aggregate prices.

Acquisition accounting does not explain the 32% revenue growth. The 2025 annual report and H1 2026 report identify no material acquisition-driven change in consolidation scope. Hongfa did add overseas capacity and new entities, including the Vietnam automotive-electronics venture, but the reported growth should be read predominantly as operating growth, mix and market expansion, not a purchased revenue step-up.

For H1 the cash-flow picture is much weaker than the income statement. Operating cash flow collapsed 86.33% to CNY114m. Cash received from customers increased from CNY7.406bn to CNY10.827bn, but cash paid for goods and services almost doubled, from CNY4.306bn to CNY8.098bn. Accounts receivable climbed from CNY4.144bn at the end of 2025 to CNY6.224bn at June, a 50.2% increase; notes payable and accounts payable also rose sharply. Average year-end and June receivables give an indicative receivable period of about 86 days. Adding accounts payable and notes payable together gives roughly 115 days of supplier financing. The missing inventory-day term prevents me from presenting a false-precision cash-conversion-cycle number, but the CNY2.08bn six-month increase in receivables and the 88% jump in supplier cash payments make the conclusion clear: a substantial part of the growth was funded through working capital.

That H1 deterioration should not be extrapolated mechanically. Full-year operating cash flow was CNY2.661bn in 2023, CNY2.235bn in 2024 and CNY2.969bn in 2025, equivalent to approximately 1.91x, 1.37x and 1.69x attributable net profit respectively. Hongfa has historically converted annual accounting profit well into cash, which makes H1 2026 a sharp negative deviation, not proof of a permanently poor cash model. It is still a deviation that investors need to see reverse.

The underlying business remains unusually concentrated around one product family. Relays generated CNY15.703bn in 2025, about 91% of total group revenue, at a 35.66% gross margin. The much smaller electrical-products business generated CNY758m at 21.82% gross margin. Because the lower-margin electrical segment actually shrank 4.27% in 2025 while relays grew 23.64%, top-level product mix should have supported group margin, not depressed it. The unresolved mix issue sits inside the relay category: power relays, signal relays, industrial relays, automotive relays, metering relays and high-voltage DC relays have very different selling prices and material content. Hongfa does not disclose end-market revenue or margin with enough granularity to quantify that internal bridge.

The strongest demand pockets in H1 2026 were industrial-control applications linked to computing infrastructure and new-energy equipment, overseas photovoltaic and energy-storage applications, consumer electronics, and high-voltage DC products for new-energy commercial vehicles. Traditional automotive relays were steady, not explosive. Hongfa also reported strong growth in high-voltage control boxes. This supports the market narrative that Hongfa is evolving from a conventional appliance-and-meter relay maker into a power-switching supplier for electrified vehicles, storage, data centers and industrial automation.

Market-share evidence is stronger than the usual “we are number one” assertion. Hongfa cites the China Electronic Components Association Information Center's 2025 relay study, which estimates global electromagnetic-relay demand at approximately 12.11bn units and CNY59.59bn of value; the same filing states Hongfa ranks first globally, ahead of TE Connectivity and Omron. Hongfa itself sold 3.464bn relay units for CNY15.703bn in 2025. Dividing company figures by the association denominators gives an inferred share of about 28.6% by units and 26.4% by value. Those are my calculations, not audited market-share figures, and the numerator and denominator definitions may not align perfectly. Even with that caveat, they independently make the #1 claim credible.

The moat is real but should be described precisely. Hongfa has more than 160 relay series and around 40,000 specifications, annual relay capacity above three billion units, vertically integrated mold, parts and automation capabilities, micrometre-level mold precision, a roughly CNY240m testing laboratory covering more than 14,000 square metres, and VDE, TÜV, UL and CNAS recognition. Automotive and industrial customers do not casually substitute a safety-critical switching component once it has been qualified, especially when the incumbent can cover dozens of adjacent specifications.

The margin record puts a limit on how far that moat should be translated into “pricing power.” A supplier with absolute pricing power would not see relay gross margin fall 2.33 points while raw-material costs rise, followed by another 1.56-point group compression in H1 2026. Hongfa has qualification stickiness, scale, process know-how and catalogue breadth. It does not have the economics of a monopoly that can instantly pass through every silver and copper spike. I grade the operating moat stronger than the pricing moat.

The high-voltage DC relay franchise is at once the most interesting growth asset and the business that deserves the most technological skepticism. Hongfa's latest filings explicitly report rapid growth in HVDC relays and control boxes, and the company established an 80%-held Vietnamese venture with VinFast to make automotive electronic-control modules. But Hongfa does not publicly disclose a reliable platform-by-platform customer list, vehicle content figure, or HVDC customer concentration. Claims in secondary research naming individual global EV platforms should not be treated as verified here.

Solid-state substitution is a legitimate three-to-five-year threat, although “solid state replaces all mechanical contactors” is too simple. Infineon and Texas Instruments already market galvanically isolated solid-state relay technologies with no mechanical moving parts and very fast switching. Their existence means the semiconductor path is commercial, not theoretical. Electromechanical contactors retain advantages in low steady-state conduction loss, simple physical contact separation, failure visibility and high-current economics. My inference is that auxiliary and lower-current functions are more exposed to semiconductor substitution than the main high-current battery disconnect in the near term, while hybrid architectures could gradually reduce mechanical-relay content later.

The international business is strategically important and economically attractive. Overseas revenue was CNY4.918bn in 2025, roughly 29.7% of main-business revenue, with a 40.20% gross margin versus 32.74% domestically. Hongfa has manufacturing or operating facilities in Germany and Indonesia and has begun building the Vietnam footprint. Yet overseas assets represented only 9.31% of consolidated assets at H1 2026. The revenue footprint is considerably more global than the asset footprint. Overseas manufacturing is a useful hedge against customer demands for China-plus-one supply, but today it is a partial hedge, not a full localization of the supply chain.

The market is currently paying for three stories at once: a cyclical rebound in ordinary relays; structural growth in EV, storage, data-center and industrial power switching; and a continuing rerating from “Chinese low-cost relay producer” toward “global electrical-component platform.” Sell-side sentiment is already constructive: the 16 September market page showed 12 buy ratings, one hold and one sell, with a mean target of CNY42.16. That consensus leaves less room for ordinary execution to surprise positively.

At CNY34.73, the market capitalization is about CNY53.75bn. TTM attributable profit, calculated as FY2025 profit less H1 2025 plus H1 2026, is approximately CNY1.949bn, giving a trailing P/E around 27.6x. On the same basis, TTM ex-non-recurring attributable profit is roughly CNY1.818bn, implying about 29.6x. The higher ex-non-recurring multiple matters because I regard that as the cleaner earnings denominator.

The qualitative portrait: a company in transition. Hongfa is moving from a dominant electromechanical-relay franchise into a broader high-voltage switching and electrical-component company while localizing production overseas at the same time. The core franchise remains profitable and cash-generative across full years, but 2025–H1 2026 shows that commodity sensitivity, working-capital intensity and semiconductor substitution keep it from being a frictionless compounder.

Vertical history and financial review

Hongfa's operating history and its stock-market history begin at different places. The relay business traces its roots to Xiamen in the 1980s. Founder Guo Manjin came out of an industrial background that included planning, sales and management positions at a state-owned factory before building Hongfa. The operating culture that emerged was manufacturing-heavy rather than asset-light: develop contact materials, tooling, precision parts, automation and testing internally instead of relying purely on assembly. That vertical integration remains visible four decades later.

Stock code 600885 has a different ancestry. The listed predecessor went public on the Shanghai Stock Exchange on 5 February 1996 at an original issue price of CNY4.00, passing through names including 双虎涂料，力诺工业，力诺太阳 and ST 力阳. That original IPO is not the economic IPO of today's Hongfa relay business.

The defining capital-market event occurred in 2011–2012. The listed shell agreed to exchange essentially all of its assets and liabilities for a 75.01% stake in Xiamen Hongfa held by Youge Investment, Lianfa Group and Jiangxi Electronics Group. The difference between the assets swapped was paid with a private share issuance priced at CNY7.33 per share. Contemporary reporting placed the injected Hongfa stake at roughly CNY2.377bn and the incremental share issue at approximately 323m shares. The transaction changed the underlying business from the troubled Linuo solar/glass-related assets into relay manufacturing; the listed abbreviation subsequently became ST 宏发.

That reverse-merger structure explains several features that still matter. First, the listed entity never wholly owned Xiamen Hongfa. Second, minority-shareholder economics are structurally embedded in the consolidated statements. Third, the long-term controlling group is tied to the managers who built the operating company, not to the original 1996 shell. The latest report continues to identify Youge Investment and a 22-person concert-party arrangement centered on Guo Manjin in the control structure.

The company's post-restructuring development can be divided into four business stages, not a yearly chronology.

The first stage was domestication and scale. Hongfa expanded from traditional power relays into metering, appliance, signal, industrial and automotive relays while steadily internalizing tooling and production equipment. The goal was to escape a commodity-component trap by making process control and high-volume automated production themselves part of the product. The legacy of that period is today's breadth: more than 160 series, around 40,000 specifications and multi-billion-unit capacity.

The second stage was global qualification and premium-market penetration. The company built laboratories accredited or recognized by major global certification bodies and expanded sales and engineering outside mainland China. This changed the competitive set: Hongfa was no longer fighting only local relay factories but TE Connectivity, Omron, Panasonic-related relay businesses and regional specialists. Customer qualification and catalogue breadth became more valuable than merely quoting a low unit price.

The third stage was electrification. Electric vehicles, charging, photovoltaic systems, smart meters and energy storage increased the value of reliable DC switching. Hongfa developed higher-value automotive and HVDC devices, while conventional appliance and industrial relays continued to supply the base load. The 2025 report says HVDC relays maintained a high market position and that new-energy control-module shipments reached roughly CNY380m after several-fold growth.

The fourth, current stage is diversification around the relay rather than away from it. Management describes a “5+” expansion into low-voltage devices, capacitors, connectors, current sensors, fuses and other adjacent products. Of the 566 new-product projects completed in H1 2026, 62% related to these “5+” businesses. This is economically important: Hongfa is trying to use the relay customer base and manufacturing system to increase content per customer. It is also the point at which investors must watch capital efficiency, because broadening the catalogue can create profitable cross-selling or simply consume more capex.

The financing record fits that expansion. Hongfa issued CNY2bn of convertible bonds in 2021. In late 2025 it exercised the early-redemption clause; only CNY3.558m principal remained unconverted at the redemption record date and was paid out in December. There is therefore no material outstanding convertible overhang in the latest capital structure, although past conversion contributed to the enlarged equity base.

The latest capital structure contains 1,547,594,313 ordinary A shares. The interim equity statement shows no preferred-stock or perpetual-security balance, and the earlier convertible bond had been redeemed. At 30 June, Youge Investment held 399.216m shares, 25.80%. It had 59.172m shares pledged at the interim date, equivalent to about 14.8% of its own stake and 3.82% of all Hongfa shares. Subsequent market data showed aggregate pledged shares declining to around 3.27% of total capital by 14 August, so the pledge position improved after the interim cut-off.

There is only one listed ordinary A-share class in the latest disclosure. No preferred class is outstanding. I found no active employee-share-ownership plan in the H1 filing and no outstanding public convertible following the December 2025 redemption. What remains is conventional equity ownership, with no dual-class or VIE structure.

Guo Manjin remains both chairman and general manager and is identified as the actual controller. That continuity has advantages: product and capital allocation have been unusually consistent over decades. It also creates an obvious succession variable because Guo was born in 1948. Concentration of chair, chief executive and controlling influence in a founder nearing eighty makes management succession a material three-to-five-year governance issue even without any present sign of operating disruption.

The recent financial progression is shown below. I use the 2023–2025 reconciled primary-file series plus H1 2026; older history is used narratively because the latest reports do not provide a homogeneous ten-year restated table.

† H1 ROE is the interim reported weighted ROE, not annualized.

The 2023–2025 figures come from the company's 2025 annual report; H1 2026 comes from the 2026 interim report.

Revenue accelerated from 9% growth in 2024 to 22% in 2025 and 32% in H1 2026. Profit did not accelerate at the same rate. Attributable earnings rose 7.8% in 2025 and 19.9% in H1 2026. That is the central vertical change in the story: Hongfa has moved from a period in which growth and margin were reasonably aligned into a period where demand is expanding faster than incremental profit.

The balance sheet is manageable, not leveraged. The 2021 convertible has gone, and H1 short-term borrowing was CNY870m. The more important balance-sheet movement is operating working capital: receivables, supplier balances and equipment/project prepayments expanded rapidly with the production ramp. Accounts receivable was CNY6.224bn at June, while short-term debt was less than CNY1bn. Permanent-loss risk comes more from return on new capacity and collection discipline than from an obvious debt-refinancing wall.

Dividend policy is meaningful but not the reason to own the stock. The 2025 proposal was CNY0.347 per share, approximately CNY537m in aggregate and 30.56% of attributable profit. At the CNY34.73 reference price, that is almost exactly a 1.0% cash yield. Hongfa is retaining most earnings because it is still funding equipment, automation and overseas expansion.

Government support is present but does not dominate earnings. H1 2026 government grants recognized in current profit were approximately CNY115.5m. Of that, CNY69.9m met the regulatory definition of non-recurring government support for the non-recurring-profit reconciliation. After tax, minority-interest effects and other non-recurring items, the total gap between attributable profit and ex-non-recurring attributable profit was CNY53.5m, only 4.6% of attributable earnings. The clean-profit line confirms that the H1 margin problem is operational, not the product of a one-off accounting gain disappearing.

The auditor issued a standard unqualified opinion on the 2025 annual financial statements. That does not eliminate normal accounting-estimate risk, but the latest audited accounts do not present a qualified-opinion warning on Hongfa itself.

From a capital-market perspective, the reverse merger was the first rerating. The next large rerating came as Hongfa proved that a Chinese relay manufacturer could win globally instead of remaining a domestic low-cost substitute. The EV and new-energy cycle then provided another valuation narrative. The current 52-week range of CNY24.69–40.41 and a price in the mid-CNY30s show that the stock has already recovered substantially from the lower end of its recent range.

The market's label has moved over time: restructuring story, global-share gainer, EV component supplier, and now broader electrification/data-center beneficiary. The important distinction is that the underlying business quality did improve during those transitions. The valuation rerating was not purely thematic. The risk today is that the market pays for the next improvement before Hongfa proves that the current revenue acceleration can restore rather than dilute margins.

Business model, moat, industry and horizontal competition

Hongfa's reported revenue segmentation understates the diversity of the end markets because nearly everything still enters the accounts as “relays.” In 2025, relays were CNY15.703bn of revenue and electrical products CNY758m. Relays were roughly 91.3% of consolidated revenue. The economic diversification occurs inside that 91%: appliance power relays, automotive relays, industrial relays, signal relays, metering/power-grid relays and high-voltage DC devices have different customers and economics.

Overseas business overlaps the product categories and is shown as a geographic lens, not an additive segment. Source: Hongfa 2025 annual report.

Traditional appliance and consumer-electronics relays provide scale. They are high-volume products where automation, yield and purchasing efficiency matter enormously because the absolute selling price is low. H1 2026 demand accelerated as extreme temperatures supported appliance demand and smart-home penetration continued. This is good base-business growth but does not deserve an EV-like multiple on its own.

Industrial relays are increasingly tied to automation, robotics, machine controls, new-energy equipment and data-center power infrastructure. Hongfa reported rapid H1 shipment growth and supply tightness in parts of industrial demand. This business is attractive because industrial customers value reliability, certification and availability across a wide catalogue, making a large installed product family more defensible than a single relay model.

Power and metering relays sit between a regulated replacement cycle and structural electrification. Domestic smart-meter standards support relatively steady replacement demand, while overseas photovoltaic and storage systems are growing faster. This is one reason Hongfa's end-market cycle is less correlated than a pure automotive supplier: appliance, grid, solar, industrial automation and vehicles seldom peak simultaneously.

Automotive is strategically different because design qualification takes longer and failure costs are much higher. Once a relay has been designed into a platform, switching suppliers is not analogous to changing a commodity screw. The cost and time of validation create stickiness. The counterweight is OEM procurement practice: auto manufacturers and Tier-1 suppliers often dual-source precisely to prevent a qualified supplier from acquiring unlimited pricing power.

High-voltage DC switching raises the economic stakes. EV batteries and stationary storage need controlled connection and isolation of high-voltage circuits; the device must interrupt DC current without unsafe arcing. Hongfa has built a dedicated HVDC product and manufacturing base, including Zhejiang Hongzhou, whose disclosed business scope is high-voltage DC electrical products for energy applications. H1 2026 filings say HVDC relays for new-energy commercial vehicles grew rapidly, as did high-voltage control boxes.

The company has not provided enough public data to verify a credible “content per vehicle” number. It also does not disclose a customer-by-customer HVDC revenue table. The only major recent OEM relationship made explicit through corporate structure is the Vietnam venture connected with VinFast, where Hongfa holds 80% and plans to manufacture automotive electronic-control modules and related equipment. I therefore do not attach unverified content-per-car or Tesla/BYD/platform labels to the valuation.

Customer concentration at group level is moderate. The five largest customers represented CNY4.345bn, or 25.26% of 2025 revenue. The five largest suppliers represented 21.12% of procurement. That is reassuring at the consolidated level, but it does not prove that the fast-growing HVDC subsegment has the same diversification. Hongfa does not disclose that narrower concentration.

Hongfa's variable-cost exposure is substantial. Raw materials accounted for 78.06% of relay manufacturing cost in 2025; labor was 12.16% and manufacturing overhead 9.78%. That composition explains why revenue growth can fail to produce expected operating leverage when silver, copper and related materials rise sharply. Hongfa has genuine fixed-cost leverage in automation and overhead, but the raw-material base remains too large for scale alone to guarantee higher margins.

The moat has four credible layers.

Scale and manufacturing integration are the strongest. Hongfa designs and builds molds, precision parts and automation lines internally. It reports mold precision down to around one micrometre and commissioned 22 flexible or automated lines plus around 80 pieces of precision upstream equipment in H1 2026. This reduces dependence on third-party tooling and shortens the feedback loop between product design and mass production.

Qualification and reliability form the second layer. Hongfa reports roughly CNY240m invested in its relay testing facility, more than 14,000 square metres of laboratory space, recognition from VDE, TÜV, UL and CNAS, and participation in IEC standards. These capabilities matter most in automotive, industrial and power applications where the cost of a field failure dwarfs the relay price.

Catalogue breadth is the third. With around 40,000 specifications, Hongfa can supply a customer across multiple current, voltage, package and application requirements. A smaller competitor may beat Hongfa on one product price; matching the catalogue, qualification record and delivery system simultaneously is harder.

Vertical know-how in contact materials and production engineering is the fourth. The relay itself is mature technology; the economic differentiation lies partly in metallurgy, arc control, sealing, consistency, life testing and automated assembly at enormous volume. This is why manufacturing yield and reliability data matter as much as patents.

The pricing evidence prevents me from calling the moat “strong” without qualification. Raw materials rose faster than relay revenue in 2025, and gross margin compressed. Hongfa's own risk disclosure says profitability is exposed when raw-material increases cannot be passed through. The barrier to entry is meaningful; the barrier to customer negotiation is lower.

The industry itself is mature in units but still growing in value. The association study cited by Hongfa estimates global electromagnetic-relay demand at 12.11bn units and CNY59.59bn in 2025, with 2029 demand reaching 13.84bn units and CNY76.53bn. That implies only 3.6% unit CAGR but about 7.1% value CAGR. China is expected to grow faster, from roughly 9.89bn units and CNY42.46bn in 2025 to 12.05bn units and CNY57.76bn in 2029, corresponding to about 5.1% unit and 8.8% value CAGR.

That gap between unit growth and value growth is the heart of the industry investment case. Relays are not suddenly becoming scarce. Higher-value applications are lifting the value per switching function. Automotive HVDC, energy storage, industrial automation and higher-spec power applications carry much more value than basic appliance switching. Hongfa's growth above the market rate depends on mix and share, not simply riding unit demand.

The 2025 figures also let us test Hongfa's global-share claim. As noted above, a direct division of company relay sales by the association's global market estimates implies approximately 28.6% unit share and 26.4% value share. The company reports the global ranking as Hongfa first, TE Connectivity second and Omron third. Even allowing for definition mismatch, Hongfa's scale is large enough that a claim of global leadership is plausible without relying on management adjectives.

TE Connectivity represents one competitive archetype: a much larger global connectivity and sensor platform with deep automotive and industrial relationships. Its equity market capitalization was approximately US$61.7bn on 15 September 2026, or about CNY417bn at the 16 September official central parity. TE reported fiscal third-quarter 2026 sales growth of 14% and EPS growth of 19%. The advantage that matters is not that TE is a “better relay company”; it can package relays/contactors with connectors, sensors and broader electrical architecture into global OEM relationships.

Omron represents a second archetype: an established Japanese automation and components group with a long relay history, global industrial distribution and customer trust. Hongfa's cited market study ranks it third globally in relays. Omron's challenge to Hongfa is strongest where a customer values complete automation ecosystems and conservative supplier qualification over lowest relay manufacturing cost.

Song Chuan Precision represents a purer regional relay specialist. Its 2026 first-half revenue reached NT$4.117bn and net profit NT$438m, with net income rebounding sharply from a weak comparison base. Song Chuan shows that a specialist relay maker can compete globally without TE's broad portfolio, particularly in automotive and power switching.

Sanyou Lianzhong is the most useful domestic operating comparison. In H1 2026 it reported CNY1.375bn of revenue, up 19.29%, and CNY82.44m of attributable net profit, up 92.24%. Management attributed the improvement to stronger traditional relay demand, operating scale and customer/order/product mix optimization despite higher raw-material costs. This is an important cross-check on Hongfa: raw-material inflation was an industry problem, but it did not mechanically force every competitor's margin down. Execution and mix mattered.

† Converted from US$61.68bn using USD/CNY 6.7628 on 2026-09-16.

Sources: Hongfa interim report, TE investor relations and market data, Sanyou H1 reporting, Song Chuan disclosures/earnings reporting. Currency-valued Song Chuan revenue is deliberately left in reported TWD rather than converted without a same-date primary TWD/CNY fixing.

The comparison points to Hongfa's ecological niche. It combines the focused manufacturing economics of a relay specialist with scale approaching a category platform. It is much smaller than TE as an overall electrical-components company, but far larger than domestic relay challengers. Customers choose Hongfa when they need broad relay coverage, global certification, high-volume automation and increasingly high-voltage expertise at Chinese manufacturing economics.

That niche becomes stronger if customers diversify sourcing away from Japanese and Western incumbents while continuing to require international certifications. It becomes weaker if the electrical architecture shifts away from mechanical switching faster than Hongfa can migrate its portfolio.

Semiconductor substitution is the most important structural risk. Infineon advertises solid-state relay solutions with galvanic input-output isolation; TI emphasizes the absence of moving parts, high reliability and isolation capabilities up to several kilovolts. These products remove contact wear and permit much faster switching.

Electromechanical devices retain economic advantages where very high continuous current makes semiconductor conduction losses and thermal management expensive, and where a visible physical disconnect has safety value. The likely transition is not a one-day replacement event. My three-to-five-year base case is mixed architecture: more semiconductor switching in auxiliary/protection functions, hybrid devices in some high-value applications, and continued mechanical contactors for many main battery disconnect roles. That is an inference from the technology characteristics, not company guidance. A faster-than-expected transition would impair Hongfa twice: it would reduce future unit content and could cause the market to lower the terminal multiple of the legacy relay franchise.

Geopolitically, Hongfa has a useful but incomplete hedge. Its overseas business has better gross margin than domestic sales, and Indonesia, Germany and Vietnam provide non-mainland manufacturing nodes. The Indonesian business reported 64% revenue growth in 2025 and acquired additional industrial-park land; the Vietnam venture was established around the VinFast relationship.

The company nevertheless remains heavily rooted in mainland Chinese manufacturing. Overseas assets were only 9.31% of total assets at H1 2026 despite overseas revenue approaching 30% of main-business sales in 2025. A sudden tariff or local-content requirement affecting Chinese-origin components could move faster than Hongfa can relocate production. The latest filing discusses trade friction as a risk but does not quantify a material tariff loss through H1 2026.

Current fundamentals: margin scissors, cash conversion and growth engines

H1 2026 deserves a numerical bridge because “revenue up 32%, profit up 20%” hides several opposing forces.

Sources: 2026 Interim Report financial statements and management discussion.

The first-order effect is the 1.56-point gross-margin loss. Applied to CNY11.022bn of H1 revenue, that represents approximately CNY172m of gross profit relative to holding H1 2025 margin constant. That is large enough to explain more than the entire CNY117m shortfall between actual attributable profit and the profit Hongfa would have earned had attributable earnings simply grown at the 32.05% revenue rate, before considering offsets elsewhere.

The second effect is favorable operating leverage. Had selling, administrative and R&D expenses merely increased in line with sales, they would have been roughly CNY107m higher than reported. R&D still rose to CNY479m; Hongfa was not protecting profit by starving engineering. In 2025, R&D was CNY914m, 5.31% of sales, and fully expensed rather than capitalized.

The third effect is below gross profit. Finance expense worsened by roughly CNY116m, and management specifically points to exchange-rate movements. Credit impairment worsened by about CNY33m and asset impairment by about CNY45m. Higher investment income recovered around CNY43m. The effective tax rate fell, offsetting roughly CNY25m compared with applying the prior-year effective rate to H1 2026 pretax profit.

The fourth effect, minority interests, helped modestly instead of hurting. That is the opposite of the most intuitive reading of the holding-company structure. Lianchuang's latest H1 accounts reconfirm a 20.0001% stake in Xiamen Hongfa and show Xiamen Hongfa consolidated revenue of CNY11.022bn and net profit of CNY1.508bn. Hongfa's listed consolidated accounts allocate CNY359m of total profit to all minority shareholders, including the Lianchuang layer and minorities deeper in the operating-subsidiary tree. Because minority profit grew only 14.2%, attributable profit grew slightly faster than consolidated profit.

That does not make the minority stake irrelevant to valuation. It permanently means that investors in 600885 do not own 100% of the economics of the core operating company. The correct earnings line for an A-share valuation is attributable profit, not consolidated net income. Any valuation that applies a market multiple to CNY1.515bn H1 consolidated profit without deducting minorities overstates the economics belonging to listed shareholders.

Mix is harder to convict. The externally disclosed product mix argues against a simple low-margin diversification story: lower-margin electrical products are small and declined in 2025. Within relays, however, Hongfa does not disclose the revenue and gross margin of consumer, industrial, automotive, meter, signal and HVDC relays separately. H1 management commentary says several fast-growing categories were consumer electronics and industrial products; high-voltage commercial-vehicle relays also accelerated. Without segment-level margin data, assigning a numerical proportion of the CNY172m gross-profit shortfall to end-market mix would be invented precision.

Material cost has better evidence. In 2025, the raw-material share of relay cost rose three percentage points and material spending increased one-third. H1 2026 then occurred against exceptionally high copper and silver prices. Hongfa's risk disclosure explicitly says it may be unable to pass raw-material increases fully through to customers. I regard material cost as the largest evidenced explanation for gross-margin pressure, supplemented by internal mix, rather than the other way around.

Pricing does not look like a broad price war. The 2025 implied revenue per relay rose approximately 11.8%. That increase can come from high-value mix rather than list-price increases, so it is not proof of pricing power; it is enough to reject the stronger bear claim that Hongfa's aggregate growth was purchased through across-the-board price cuts.

The current growth drivers have different durability. Consumer-electronics demand is cyclical and weather-sensitive. Industrial automation and data-center power have a better secular component but can still inventory-correct. Meter replacement is policy and utility-cycle driven. EV high-voltage switching depends on vehicle production, electrical architecture and customer wins. Energy storage has rapid structural demand but strong customer bargaining power.

The “5+” adjacencies may become a second growth curve, but they are not yet large enough to carry the valuation independently. Hongfa completed hundreds of projects in H1, yet relay revenue still dominates the financial statements. The right analytical stance is to give the adjacency program option value, not to value it as a mature second franchise.

Cash conversion is the immediate quality test. H1 operating cash flow was only CNY114m against CNY1.156bn attributable profit, a ratio of 0.10x. On consolidated net profit the ratio was even lower, about 0.08x. This contrasts sharply with 2023–2025 full-year conversion, averaging about 1.66x attributable earnings.

The cash-flow statement explains most of the change. Customer cash receipts increased 46%, faster than reported revenue, so there is no sign that customers simply stopped paying. The major use was procurement: cash paid for goods and services increased about 88%, to CNY8.10bn. This suggests inventory procurement, higher input prices, shorter supplier payment timing or preparation for higher production all contributed.

Receivables still deserve scrutiny. Net accounts receivable rose 50.2% from year-end to CNY6.224bn. The majority of the gross book remains within one year, and Hongfa carried approximately CNY306m of total allowance after individual provisions. Using average year-end and June net receivables against H1 sales gives an indicative DSO of roughly 86 days.

Supplier financing expanded too. Accounts payable rose to CNY2.704bn from CNY2.261bn and notes payable to CNY2.568bn from CNY1.835bn. Including both, average supplier balances correspond to roughly 115 days of H1 cost of goods sold. Hongfa is not funding working capital solely with equity cash; suppliers are carrying a significant part of the growth.

I do not publish a single exact cash-conversion-cycle number because the retrieved primary-source extract does not provide a sufficiently reliable interim inventory balance alongside these calculations. The honest statement is CCC = roughly 86 DSO + inventory days − roughly 115 supplier-financing days. The missing inventory term is material. That is one of the report's explicit data blind spots, not a reason to fabricate an apparently precise figure.

Capex is likewise substantial. Management says H1 technical-transformation investment approached CNY1bn, commissioning 22 automated/flexible lines and roughly 80 precision machines. That “investment” measure is not identical to cash capital expenditure under the statutory cash-flow statement, so I do not equate the two exactly. It does establish that the CNY114m of operating cash flow was nowhere close to funding the current equipment program internally during the half.

The full-year cash record makes this a monitoring issue, not a thesis break. If H2 working capital releases as production catches up and customer collections normalize, the H1 cash trough will look cyclical. If receivables continue growing faster than sales and OCF remains below accounting profit through the full year, the business will have shifted toward materially more capital-intensive growth.

The earnings calendar matters here. As of 16 September, H1 2026 is the latest statutory reporting period; Q3 2026 has not yet ended and therefore cannot already be reported. A market earnings calendar points to 29 October 2026 for the next report.

Valuation, risks, catalysts and tracking

At the CNY34.73 reference close, Hongfa's current capitalization is CNY53.75bn. TTM attributable profit is approximately CNY1.949bn and TTM ex-non-recurring attributable profit approximately CNY1.818bn, producing P/E multiples of about 27.6x and 29.6x respectively. I use the ex-non-recurring line when discussing the cleaner underlying multiple because government grants and fair-value items make the statutory attributable number slightly less comparable over time.

The multiple is not obviously cheap for a component manufacturer whose global market by value is expected to grow around 7% annually. The premium rests on Hongfa compounding faster than the underlying relay market through share, higher-value mix and adjacent electrical products while maintaining a mid-teens-plus return on equity.

It is also not an extreme narrative valuation. A 29–30x clean trailing multiple can be supported by a durable mid-teens earnings compounder with a strong balance sheet. The problem is that H1 2026 did not show mid-teens clean growth with stable economics; it showed almost 19% clean earnings growth alongside a 1.56-point gross-margin decline and near-zero cash conversion.

The cash-flow passthrough deserves its own valuation discipline. For the three fully reconciled annual years 2023–2025, OCF/attributable-profit ratios were about 1.91x, 1.37x and 1.69x. H1 2026 was just 0.10x. This means a valuation based on one half-year FCF would be excessively bearish, while one based only on accounting EPS would ignore the current working-capital burden.

Hongfa does not disclose maintenance capex separately from growth capex. The current automation, overseas-factory and “5+” build-out clearly contains a large growth component. Because a reliable maintenance/growth split cannot be audited from public reporting, I do not manufacture an owner-earnings figure by arbitrarily labeling machinery purchases. My valuation instead uses normalized owner earnings: ex-non-recurring earnings adjusted downward in the conservative case for ongoing reinvestment and working-capital needs.

The scenario framework below values the business principally on normalized forward owner earnings/P-E, cross-checked against cash conversion. It is valuation-scenario analysis within a research framework, not investment advice.

† Includes a modest dividend contribution in the return estimate; actual dividends are not guaranteed.

The scenario assumptions are mine. Historical anchors come from company filings and current price from the 15 September close.

The conservative value around CNY30–32 is below today's price. That means the stock has no margin of safety against a scenario in which Hongfa merely grows somewhat faster than the relay market while margins remain compressed.

The base case requires gross margin to recover toward the mid-30s, working capital to normalize and clean EPS to compound low-to-mid-teens. That does not require heroic market-share gains, but it does require H1 2026's margin and cash divergence to prove temporary.

The optimistic case needs Hongfa to become more than the current relay leader. HVDC, industrial/data-center switching, overseas localization and the “5+” portfolio must increase wallet share while the gross margin rises rather than falls. I would not pay the optimistic multiple merely because EV and AI-related power demand are fashionable.

The expectation gap is concentrated in three numbers: gross margin, operating cash flow and HVDC/industrial growth. Revenue itself is less likely to surprise the market now that H1 has established a 32% growth reference point. A quarter with 20–25% sales growth, recovering margin and strong cash conversion could be more bullish than another 30% revenue quarter with falling margin.

The sell-side backdrop is constructive. As of 16 September, the market page aggregated 14 analyst views, with 12 buys, one hold and one sell and an average target of CNY42.16. Goldman Sachs was shown at CNY45 and Citi at CNY43 in recent entries. That consensus broadly overlaps my base-value band, meaning CNY40-plus is not a contrarian expectation.

The independent margin-of-safety test is less favorable. Current CNY34.73 trades above the CNY30–32 conservative value, so the margin of safety against that scenario is zero. The most fragile base-case assumption is margin normalization. Cut the assumed margin-recovery contribution to roughly 70% of my base case and normalized owner EPS falls enough to move value toward the mid-to-high CNY30s, not the low CNY40s.

If earnings remain flat for three years, the current earnings yield is roughly 3.4–3.6%, depending on whether statutory or clean TTM earnings are used, and the cash dividend yield is only about 1%. China's 10-year government-bond yield was approximately 1.68% around the research date. Holding the P/E constant would still provide a return above the bond yield through earnings retained in the business, but an investor does not receive retained earnings directly; if the multiple compresses as growth stalls, the equity return can readily fall below the government-bond hurdle.

Margin-of-safety sufficiency verdict: none.

The most important permanent-loss risks are specific.

Raw-material and pricing risk is medium probability and medium-to-high impact. The observable indicator is relay/group gross margin. If it stays below 32% despite double-digit revenue growth, Hongfa's qualification moat is not translating into adequate price capture. The transmission path is direct: copper/silver costs rise, customer price resets lag, gross profit growth falls below revenue growth, and the market stops capitalizing Hongfa as a premium compounder.

Working-capital risk is medium probability and high impact if persistent. The observable indicators are accounts-receivable growth, OCF/net-profit conversion and inventory/supplier balances. Another full-year result with OCF materially below net income after the CNY6.224bn H1 receivable balance would imply that faster growth consumes rather than produces cash. That would justify a lower multiple even if reported EPS remains positive.

High-voltage technology substitution is low-to-medium probability over 12 months but medium-to-high over five years. The indicator is semiconductor suppliers moving from auxiliary SSRs into economically competitive high-current main-battery switching, followed by vehicle-platform adoption. Faster solid-state penetration would reduce Hongfa's mechanical content per EV precisely where investors expect the most attractive growth.

Automotive customer dual-sourcing is medium probability and medium impact. Group top-five customer concentration is only 25%, but HVDC concentration is undisclosed. A large OEM shifting a second source into a fast-growing HVDC platform would hit a small but valuation-sensitive part of revenue harder than the group concentration statistic suggests.

Founder succession is medium probability over three-to-five years and potentially medium impact. The observable event is a change in the chairman/general-manager structure or control arrangement. A disciplined succession could be neutral; an unclear one could raise the governance discount because founder Guo still combines strategic, executive and controlling influence.

Trade localization is medium probability and medium impact. The indicator is overseas customers requiring local manufacturing, not merely local distribution. Germany, Indonesia and Vietnam offer a hedge, but overseas assets remain much smaller than overseas revenue exposure. Accelerated localization raises duplicate capex and initially depresses asset turns even while protecting customer access.

Positive catalysts are margin recovery as metal costs stabilize, H2 working-capital release, continued high growth in HVDC and industrial/data-center products, faster utilization of Indonesia/Vietnam, and proof that “5+” products contribute meaningful revenue rather than only development projects. The 2025 overseas gross margin shows why localization and export mix can be accretive if executed without excessive fixed cost.

Negative catalysts are another sub-33% group gross margin, receivables again growing materially faster than sales, weaker EV or storage orders, a major customer dual-sourcing event, faster solid-state adoption, or evidence that high 2026 growth came from channel/inventory loading rather than end demand.

The operating levels are company disclosures; the next-report date comes from the market earnings calendar and should be treated as expected, not as a formal company commitment.

Cross-synthesis and final research conclusion

Vertically, Hongfa has proved one capability beyond reasonable doubt: it can turn an apparently commoditized electromechanical component into a global-scale manufacturing franchise. Its history is a story of thousands of specifications, enormous production volume, vertically integrated tooling, testing infrastructure and decades of OEM qualification, rather than of one patented device producing monopoly rents. The company did not become the world's largest relay supplier because the relay itself was a new technology. It became large because it industrialized relay production more effectively than many competitors while steadily moving into harder applications.

The 2012 reverse merger was a financing and listing event, not the source of the competitive advantage. Hongfa's operating competence pre-dated the listing structure. The reverse merger mattered because it gave that operating business access to public capital, and the later CNY2bn convertible helped finance expansion, but the subsequent market-share position came from production and customer execution rather than financial engineering.

Era tailwinds helped. China's appliance supply chain gave Hongfa a huge home manufacturing base; smart meters created a large metering-relay market; electrification created HVDC demand; photovoltaic and storage opened another DC-switching market. But the association's own market data make clear that Hongfa grew far faster than the mature global relay unit market. A roughly 26–29% inferred global share is too large to attribute merely to riding an industry tide.

Those success factors still exist. The factory network, customer qualifications, catalogue, laboratories and automation capabilities have not disappeared. H1's 566 completed development projects and nearly CNY1bn of technical-transformation investment indicate that management is still reinvesting rather than harvesting the franchise.

What has changed is the quality of incremental growth. In a mature relay business, investors could reasonably focus on share, margin and cash generation. The next phase requires much more capital allocation: high-voltage product lines, control modules, overseas factories, connectors, sensors, capacitors, fuses and new automation. A company can grow faster through that transition and simultaneously earn less attractive returns on each incremental yuan of revenue.

H1 2026 is the first major warning sign of that tension. The income statement does not show business failure. Revenue grew 32%, clean profit 19%, gross profit 26%, and R&D grew 27%. It shows a business running hard while its raw-material and financial-cost base runs almost as hard.

The minority-interest structure makes this more important, not less. Listed shareholders already surrender a structural slice of the core operating subsidiary's economics to Lianchuang and other minority owners. They need the retained economics at 600885 to compound efficiently. Paying a premium multiple for consolidated operating growth that disproportionately accrues elsewhere would be a mistake. In H1 2026 that specific problem did not worsen; minority share of profit actually fell. But the structural haircut remains permanent.

Horizontally, Hongfa's strongest advantage over Sanyou or smaller specialists is scale plus breadth. Its advantage over TE or Omron is Chinese manufacturing cost, speed and focus. The company occupies a useful middle ground: global enough to qualify, focused enough to move quickly, and large enough to automate deeply.

Its weakness is equally clear. TE can sell far more than relays into a global vehicle or industrial platform. Omron can embed components within a broader automation relationship. Semiconductor suppliers can potentially remove the mechanical component entirely. Hongfa needs to expand the value it captures per customer faster than its core device is commoditized or technologically bypassed.

The “5+” strategy is a logical answer. It uses existing OEM access to sell adjacent electrical components. Yet the strategy deserves a valuation only when revenue, margin and return on invested capital become visible. Development projects alone do not create shareholder value. H1 says 62% of newly completed development projects were “5+”; the accounts still say relays are more than 90% of revenue.

The EV/storage case is similar. The demand tailwind is real, and Hongfa's filings show high growth in HVDC relays and control boxes. The market should not assume unlimited content growth because the semiconductor industry is actively commercializing solid-state relay technologies. The correct long-horizon thesis is that Hongfa must become a switching-technology company, not remain doctrinally attached to an electromechanical architecture.

A sign that management understands the localization side of that challenge is the expansion in Germany, Indonesia and Vietnam. The VinFast-linked Vietnam venture provides a concrete customer/manufacturing bridge rather than a generic “internationalization” slogan. But 9.31% overseas assets against nearly 30% overseas revenue also tells us how early the localization process remains.

The market is probably misjudging two things in opposite directions.

The bearish misjudgment would be to read the margin decline as evidence that Hongfa's competitive moat has disappeared. That goes too far. The company is gaining revenue far faster than the global market, remains the disclosed #1 supplier, retains a broad certification and automation system, and its aggregate implied revenue per relay increased rather than collapsed. The gross-margin pressure aligns closely with a documented raw-material-cost shock.

The bullish misjudgment would be to call that pressure purely temporary. Sanyou managed to improve earnings sharply in the same broad raw-material environment, and Hongfa itself says input costs cannot always be passed through. The franchise has customer stickiness; it does not have unrestricted pricing authority. If copper and silver normalize but Hongfa's margin does not, the explanation will have shifted from cyclical materials toward mix and competition.

For the next twelve months, gross margin and operating cash flow matter more than whether revenue prints 25% or 30%. A recovery above roughly 34% group gross margin accompanied by full-year OCF again exceeding attributable net profit would support the view that H1 was a working-capital/material-cost trough.

Over three years, the critical variable is whether HVDC, industrial/data-center and “5+” growth expands profit per customer rather than merely revenue per customer. The evidence to watch is segment margin, overseas utilization and return on incremental capital.

Over five years, the decisive variable is technology architecture. Hongfa can remain a high-quality component franchise if it participates in hybrid and solid-state switching as the market evolves. A company defending mechanical relays because that is where its installed capital sits would be a structurally declining franchise even while EV volumes rise.

The bull case can be condensed into four traceable reasons.

• Hongfa's 2025 sales imply roughly one-quarter to one-third of the global relay market under a like-for-like denominator, and the industry study cited in its filing ranks it first globally.
• H1 revenue grew 32.05% and ex-non-recurring attributable profit 18.97%, with industrial, data-center power, storage and HVDC applications among the stronger demand areas.
• The moat is backed by in-house tooling/automation, around 40,000 product specifications and a large internationally recognized test infrastructure rather than by brand rhetoric alone.
• Overseas sales carry materially higher gross margin than domestic sales, and Germany, Indonesia and Vietnam give Hongfa an expanding response to China-plus-one sourcing requirements.

The bear case is equally concrete.

• Group gross margin fell 1.56 points in H1 2026 after relay gross margin had already fallen 2.33 points in 2025, showing incomplete input-cost pass-through.
• H1 OCF was only CNY114m, down 86%, while receivables reached CNY6.224bn, making current growth materially more cash-intensive than recent full years.
• The listed company owns only 80% of Xiamen Hongfa; Lianchuang independently confirms a 20.0001% interest, so a permanent portion of the operating franchise belongs outside 600885 shareholders.
• Solid-state relay technology is already commercial, so the highest-growth mechanical switching applications face a credible long-term substitution path.
• At about 29.6x clean TTM earnings, the current price already assumes that Hongfa remains a premium compounder; the conservative scenario value is below market.

The pre-mortem has two plausible scripts.

In the first, copper and silver remain expensive through 2027 while automotive and storage customers insist on annual price reductions. A domestic competitor such as Sanyou and regional specialists add HVDC capacity, forcing Hongfa to preserve design wins rather than maximize price. Group gross margin stays around 31–32%, clean EPS growth falls into single digits, and the market cuts the clean P/E from around 30x to 18–20x. Even without an earnings collapse, that combination can push the share price toward the low-to-mid CNY20s.

In the second, between 2027 and 2029 semiconductor suppliers deliver economical high-current solid-state or hybrid switching solutions for more battery-pack functions. One or more large EV platforms reduce mechanical contactor content and dual-source the remaining devices. Hongfa's EV-linked revenue still grows initially because vehicle volume rises, but content per vehicle stops rising and the market removes the structural-growth premium. A 40–50% share-price drawdown becomes possible through simultaneous EPS-estimate cuts and multiple compression. Infineon and TI's existing isolated solid-state products establish the technological direction even though they do not prove this displacement timetable.

The central research conclusion is that Hongfa remains one of the higher-quality industrial component franchises in the Chinese A-share universe, but today's price asks the investor to underwrite a margin recovery that has not happened yet. The underlying demand picture is stronger than the H1 profit growth suggests; the cash-flow and gross-margin picture is weaker than the 32% revenue headline suggests. Both statements are simultaneously true.

I would rather own Hongfa after evidence that the current growth converts into cash and that gross margin can move back toward the mid-30s. At CNY34.73, the stock sits near the lower edge of my acceptable base-case holding zone, but materially above the price at which the conservative case offers a 20%-plus margin of safety. The valuation is tolerable for an existing long-horizon holder, not sufficiently discounted for an aggressive fresh position under a balanced-risk framework.

【Company-profile scores】

• Fundamental quality: high
• Growth: high
• Moat: medium
• Financial soundness: strong
• Management credibility: high
• Valuation attractiveness: medium
• Risk level: medium
• Suitable investor type: long-term growth

【Investment rating】

• Rating: Hold
• One-line thesis: Global relay scale and 20% clean-profit growth remain attractive, but margin compression and weak H1 cash conversion are already priced at about 30x clean earnings.
• Current-price classification: acceptable hold
• Whether to wait for a better price: yes. A fresh position becomes materially more attractive at CNY23–25, particularly if gross margin is stabilizing above 33% and full-year cash conversion is recovering.
• Target holding horizon: 3–5 years
• Expected annualized return: conservative approximately -4% to 0%; base approximately 9–12%; optimistic approximately 18–22% over a three-year normalization period.
• Max-loss risk: roughly 40–50% in the pre-mortem case where gross margin remains around 31–32%, high-voltage relay growth de-rates and the clean P/E compresses toward 18–20x.
• Reassessment-trigger signals: gross margin below 32% for two consecutive reporting periods; FY OCF below 0.8x attributable profit; receivables growing more than 15 percentage points faster than revenue; evidence of significant main-battery solid-state substitution; or loss of a major HVDC/customer platform.

【Ideal Buy Price】23–25 CNY

The range is at least 20% below the CNY30–32 value implied by the conservative normalized-owner-earnings case. The opportunity cost of waiting is that continued 20%-plus clean earnings growth and margin recovery could prevent the shares from reaching this range; that is preferable under a balanced-risk mandate to paying today for recovery before cash conversion confirms it.

【Valuation Range】

• current: 34.73 CNY (close as of 2026-09-15)
• bear (conservative · ideal buy zone): [23, 25]
• base (fair · acceptable hold zone): [34, 49]
• bull (optimistic · above the clearly-overvalued line): [61, 67]

The three bands derive from the valuation framework above. The bear band applies the required 20%-plus safety discount to conservative value; the base band spans the acceptable zone around a CNY40–44 base value; and the bull band begins more than 10% above the upper end of the CNY51–55 optimistic fundamental-value range.

Source discipline and research uncertainties: the principal primary documents are 《宏发科技股份有限公司 2026 年半年度报告》, Hongfa Technology Co., Ltd. 2026 Interim Report, and 《宏发科技股份有限公司 2025 年年度报告》, Hongfa Technology Co., Ltd. 2025 Annual Report. The ownership cross-check uses 《江西联创光电科技股份有限公司 2025 年年度报告》 and 《江西联创光电科技股份有限公司 2026 年半年度报告》, which independently identify Xiamen Hongfa as a 20.0001%-owned associate.

The main remaining blind spots are narrow but important. Hongfa does not disclose end-market revenue and margin finely enough to calculate a rigorous consumer/industrial/automotive/HVDC mix bridge; it does not disclose verified content per EV or customer-by-customer HVDC exposure; maintenance capex is not separated from growth capex; the extracted interim inventory data were insufficient for a precise CCC; and the market-share percentages above are inferred by matching Hongfa's reported relay sales with the CECA market denominator rather than directly published by the association as a Hongfa percentage. These uncertainties reduce the confidence of any valuation that relies on precise segment margins, not the confidence in the basic conclusion that Hongfa is the largest-scale relay supplier in the disclosed competitive set.

Other tickers mentioned

• TEL.US: TE Connectivity is the principal global electrical-connectivity reference and the #2 relay supplier in the industry ranking cited by Hongfa.
• 6645.TSE: Omron is the #3 relay supplier in Hongfa's cited global ranking and an important industrial-automation incumbent.
• 7788.TW: Song Chuan Precision is a focused Taiwanese relay specialist and direct regional competitor.
• 300932.SHE: Sanyou Lianzhong is a smaller Chinese relay specialist whose H1 2026 margin improvement provides a useful operating benchmark.
• 600363.SHG: Lianchuang Optoelectronic owns 20.0001% of Xiamen Hongfa Electroacoustic and independently confirms the minority-interest structure.
• 6752.TSE: Panasonic is a long-standing Japanese electrical-component and relay competitor used as a broader industry reference.

This report is based on public information and does not constitute investment advice. Markets carry risk; invest with caution.