Fenghua Advanced Technology (000636.SZ): Volume and pricing drive 3Q26 beat

Fenghua Advanced Technology reported 3Q26 results. In 9M26, revenue rose 41.2% y-y to CNY5,799mn, gross margin increased 4.2pp y-y to 22.8%, and net profit grew 180.9% y-y to CNY642mn. In 3Q26, revenue reached CNY2,299mn, up 72.0% y-y and 15.8% q-q; gross margin was 29.0%, up 9.0pp y-y and 8.7pp q-q; net profit rose 470.2% y-y and 74.2% q-q to CNY351mn. Stronger-than-expected volume and ASP gains in core products, together with faster product mix optimization, drove the beat. Given continued strong AI demand, which should further tighten industry supply and demand and support price increases, we raise 2026-28F revenue forecasts by 11%/19%/18% to CNY7,945mn/CNY10,183mn/CNY11,672mn and gross margin assumptions by 2.6pp/1.9pp/2.6pp, and lift net profit forecasts by 28%/28%/37% to CNY943mn/CNY1,393mn/CNY1,571mn. As earnings have recovered from a low base and are expected to keep growing, we switch valuation from P/B to P/E and apply 42x 2027F P/E, a premium to the peer average of 18x, just