Summary of Key Points
As a leading company in the liquid cooling industry, Inveco saw its revenue increase by 17.24% year-on-year to 3.02 billion yuan in the first half of 2026, yet its net profit decreased by 14.32%. The sharp decline in net profit after deducting non-recurring items in the first quarter (only 5 million yuan, a year-on-year decrease of 87%) caused the stock price to hit the daily limit down. Performance improved in the second quarter (a 6% increase in net profit after deducting non-recurring items), but the gross margin still declined. Although overseas revenue increased significantly (by 71%), the cost growth rate was even faster (by 94%), leading to a decrease in profitability. Inveco did not disclose the revenue from its liquid cooling business separately, raising doubts about the company's ability to deliver actual results. The stock price has fallen by more than 35% in the past six months, as investors have become more cautious about its valuation.
Detailed Analysis
1. Revenue Growth, but Profit Decline: Did the Second Quarter Make Up for the First Quarter’s Losses?
Inveco’s revenue increased by 17% in the first half of the year, but its net profit decreased by 14%. This is similar to a restaurant experiencing more customers but less profit. The main issue was in the first quarter: although revenue rose by 26%, the net profit after deducting non-recurring items was only 5 million yuan, indicating a significant loss. The company made efforts to recover in the second quarter, with revenue increasing by 12% to 1.84 billion yuan and net profit after deducting non-recurring items increasing by 6% to 170 million yuan. However, the overall half-year profit still decreased, meaning that the problems identified in the first quarter were only partially addressed.
2. Declining Gross Margin: Less Profit per Sale
The gross margin represents the amount of net profit generated per 100 yuan of sales, after deducting direct costs such as materials and labor. Inveco’s gross margin decreased across all its businesses in the first half of the year:
- For its core data center cooling business, revenue increased by 25%, but the gross margin dropped by 2.49 percentage points (from 25.83% to 23.34%).
- For the cabinet cooling business, revenue increased by 15%, but the gross margin decreased by 1.32 percentage points.
- For overseas business, revenue increased by 71%, but costs rose by 94%, resulting in a 6.24 percentage point drop in the gross margin. In other words, whether in domestic markets or new overseas markets, the company is earning less per unit of sales, and the pressure of rising costs is increasing.
3. The Missing Liquid Cooling Business Data: Investors Are Uncertain
Inveco is considered a leader in the liquid cooling industry, but its half-year report did not provide specific figures for its liquid cooling business. Investors can only see the growth in data center and cabinet cooling businesses, but they do not know the contribution of the liquid cooling business to overall revenue. Previously, the company’s stock price was driven by the perception of being a supplier for NVIDIA, but without transparent data, investors are questioning the company’s actual profitability in this highly competitive sector.
4. Stock Price Drop of Over 30%: Investors Are Becoming More Realistic
The stock price has fallen by more than 35% in the past six months, with a 21% drop in just 60 days. The company’s valuation was inflated due to the prospects of the liquid cooling industry and partnerships with NVIDIA. However, the poor first-quarter performance, continuous decline in gross margins, and lack of transparency in liquid cooling data have caused investors to reassess the company’s financial health. A story alone is not enough; real profits are what matter most.
5. Increased Cash Flow is a Positive Development, but Not Enough to Offset Profit Losses
The only positive aspect is the 126% increase in operating cash flow, which reached 61.87 million yuan. Cash flow is like a company’s “wallet”; a stronger ability to generate cash indicates more financial stability. However, this improvement is not sufficient to offset the concerns about declining profitability. Investors ultimately want to see sustained profitability, and good cash flow is merely a bonus, not a solution to the core issues.
Conclusion
Although Inveco has improved its performance in the second quarter, issues such as declining gross margins and lack of transparency in its liquid cooling business remain. The market has shifted from focusing on speculative concepts to evaluating actual financial results. The company needs to provide more transparent data and stable profit growth to regain investors’ trust. Otherwise, the high demand in the liquid cooling industry may not be enough to support its current valuation.