Anker (668 HK, HK$98.05, HK$4.9bn): Underlying Strength Beyond Headline Earnings

Anker is a leading global consumer electronics brand spanning smart charging, energy storage, smart home and audio-visual products. Its 3Q26 revenue grew 17% YoY despite the earlier timing of Amazon Prime Day and weakness in certain smart home products. US tariff refunds supported profitability, but investment fair-value losses dragged attributable net profit down by 27% YoY, while recurring net profit rose 61% YoY. Looking ahead, the “One Anker” brand consolidation and product diversification should support long-term growth, although cash conversion and trade policy uncertainties remain key considerations.

Revenue Growth Moderates Amid Business Divergence: 3Q26 revenue reached RMB9.54bn (+17% YoY/ +6% QoQ), slowing from 31% YoY growth in 2Q, mainly due to Amazon Prime Day shifting from July last year to June this year and weakness in smart home products. Combined 2Q–3Q revenue grew approximately 23% YoY, indicating resilient underlying demand. Smart charging and energy storage maintained solid growth, with SOLIX benefiting from supply recovery and new product launches. Smart home and innovation products were pressured by intensifying competition and slower launches in robotic vacuum cleaners, alongside security product upgrades and channel restructuring. Smart audio-visual products maintained steady growth.

By channel, online revenue rose 5.4% YoY to RMB6.03bn, with its contribution falling to 63% amid weaker third-party e-commerce sales (partly due to earlier Amazon Prime Day). Direct online sales increased 49.6% to RMB1.2bn, accounting for 12% of total revenue. Offline revenue grew 44.2% to RMB3.5bn, accelerating both YoY and QoQ, lifting its contribution to 37%. Overseas markets continued to contribute approximately 95% of revenue, versus 5% from China. A lower comparison base, progress in security channel restructuring and new energy storage products are expected to support a recovery in 4Q revenue growth.

Operating Efficiency Supports Underlying Earnings: 3Q26 GPM reached 46% (+1.4ppts YoY/−9ppts QoQ), partly boosted by US IEEPA tariff refunds that reduced COGS, though these refunds had largely been recognized by 2Q26. Excluding the refunds, GPM is estimated to have declined approximately 1ppt YoY, reflecting higher raw material costs and inventory clearance in robotic vacuum cleaners. The S&M ratio fell 2.4ppts YoY to 20.6%, partly benefiting from the earlier promotional calendar and improved marketing efficiency, offsetting a 1.1ppt increase in the R&D expense ratio to 10.3%. Investment fair-value losses of roughly RMB350mn dragged attributable net profit down 27% YoY to RMB560mn, while adjusted net profit rose 61.2% to RMB840mn. Market estimates suggest that, after adjusting for tariff refunds and investment valuation changes, underlying net profit still grew by approximately 20–25% YoY, underscoring the company’s continued profitability and earnings resilience.

Working Capital Pressure Weighs on Cash Conversion: 9M26 OCF improved to RMB380mn from an outflow of RMB870mn a year earlier, partly supported by US tariff refunds. However, it represented only 17% of adjusted net profit of RMB2.28bn, reflecting increased working capital requirements. Inventory rose 68% from end-2025 to RMB8.4bn, mainly due to stocking ahead of the 4Q peak season and advance raw material procurement. AR also increased 36.9% to RMB2.56bn, further weighing on cash conversion. Cash and bank balances rose 124% to RMB8.18bn, largely due to H-share listing proceeds. Net cash stood at RMB5.25bn. Overall, the company’s liquidity position remains solid.

Our views:  Anker’s 3Q26 performance was more resilient than we previously expected, with tariff refunds providing greater earnings support than anticipated. We view the “One Anker” brand consolidation positively, leveraging established brand recognition and customer trust on Amazon to expand into energy storage, smart home and baby care, potentially reducing customer acquisition costs, encouraging cross-selling and strengthening pricing power. Products such as MindBase also signal a gradual shift from standalone hardware towards an integrated product ecosystem and software platform, expanding long-term growth opportunities. Despite intense competition, Anker has maintained ROIC above 15% since the 2022 downturn, reflecting its brand strength, R&D capabilities and asset-light business model.

However, strong capital returns have yet to be translated fully into OCF amid rising inventory and working capital requirements. While outsourced manufacturing limits capital expenditure, it also exposes the company to production relocation challenges and trade policy uncertainties, reducing earnings visibility and potentially constraining valuation. We remain positive on Anker’s long-term competitiveness and look for brand consolidation and product expansion to translate into more sustainable earnings and cash generation. The counter is trading at 19x FY26E &16x FY27E P/E. (Research Department).