Summary of Hongfa Technology (600885.SS) Conference Call Company Overview - **Company**: Hongfa Technology (600885.SS) - **Industry**: Relay and electrical components manufacturing Key Financial Results - **2Q25 Financial Performance**: - Revenue: Rmb4,364 million, +16% YoY, +10% QoQ [1] - Gross Profit: Rmb1,513 million, +16% YoY, +12% QoQ [1] - Operating Profit: Rmb798 million, +18% YoY, +32% QoQ [1] - Net Profit: Rmb553 million, +13% YoY, +35% QoQ [1] - Gross Profit Margin (GPM): 34.7%, flat YoY, +1pp QoQ [1] Segment Performance - **General Relay (Home Appliance)**: Rmb864 million in 2Q25, +0% YoY [5] - **General Relay (Solar Inverters)**: Rmb397 million in 2Q25, +60% YoY due to demand in China [5] - **Auto Relay**: Rmb607 million in 2Q25, +16% YoY [5] - **HVDC Relay**: Rmb1,348 million in 2Q25, +54% YoY, gaining market share in Europe [5] - **Industrial Control Relay**: Rmb312 million in 2Q25, +44% YoY, recovering due to restocking cycle in Europe [5] - **Power Relay**: Rmb568 million in 2Q25, -10% YoY, affected by North American demand [11] Market Outlook - **Demand Stabilization**: Management expects demand to stabilize in 2H25E, overcoming tariff policy uncertainties [1] - **European Demand Recovery**: Anticipated recovery in European demand for industrial control relays [1] - **China and India Contribution**: Incremental contributions expected from China and India markets for power relays [1] - **Indirect Data Center Applications**: Expected revenue of Rmb700-800 million in 2024, with 20-30% YoY growth [1] Growth Projections - **2025E Growth Forecast**: Projected 13% YoY revenue growth and 14% YoY net profit growth [1] - **GPM Improvement**: Expected GPM to improve to 37.7% in 2H25E [9] Capacity Expansion - **Germany Factory**: Began production in April 2025, focusing on HVDC products for European customers [8] - **Indonesia Facility**: Phase I on track for commercial operation by June 2026E, aiming for localized production [8] Risks and Valuation - **Market Share**: Hongfa holds a 24% global market share in relays as of 2024, with potential for further gains [13] - **Valuation**: Target price set at Rmb29.71 based on a 2026E P/E of 20x, with a current price of Rmb23.61, indicating a 25.9% upside [16] - **Downside Risks**: Include weaker-than-expected smart meter revenue and rising raw material costs [14] Conclusion - **Investment Rating**: The company remains rated as a Buy, with a solid setup for continued growth into 2H25E [1][13]

Core Viewpoint - The stock price of Hongfa Technology closed at 24.39 yuan on August 4, 2025, reflecting a decrease of 0.20% from the previous trading day [1] Company Overview - Hongfa Technology specializes in the research, development, production, and sales of relays and electrical products, which are widely used in home appliances, automobiles, and power sectors [1] - The company operates in sectors including power grid equipment, new energy, and new materials [1] Market Activity - On August 4, 2025, the trading volume was 88,300 hands, with a transaction value of 215 million yuan and a price fluctuation of 1.31% [1] - In the second quarter, the social security fund increased its holdings in Hongfa Technology by 17.2 million shares, representing a 76.77% increase, raising its ownership stake to 1.18% [1] - Over the past five trading days, the company has been investigated by 140 institutions, indicating a high level of institutional interest [1] Fund Flow - On August 4, 2025, the net inflow of main funds into Hongfa Technology was 340,600 yuan, while the cumulative net outflow over the past five days was 12.9 million yuan [1]

Group 1 - Recent data indicates a surge in international capital reallocating towards Chinese assets, with nearly 60% of sovereign wealth funds prioritizing China as an investment market [1][2] - Korean investors have shown increasing enthusiasm for Chinese stocks, with a cumulative trading volume of $5.764 billion in 2023, making China the second-largest overseas investment destination for Korean investors [2] - UBS's survey reveals that 19% of global family offices plan to increase their allocation to Chinese assets, marking a 3 percentage point increase from 2024 [2] Group 2 - In July, five major overseas Chinese stock ETFs attracted over $2 billion in investments, with significant growth in assets under management for several ETFs [3] - Sovereign wealth funds are driven to allocate to Chinese assets due to attractive local returns, diversification benefits, and expanded market access for foreign investors [3] Group 3 - The Chinese economy's recovery has exceeded market expectations, bolstered by rapid policy responses to stabilize expectations and stimulate growth, enhancing international investor confidence [4] - China has made significant advancements in technology and innovation, leading to a re-evaluation of asset valuations by international investors [4] Group 4 - As of August 1, four A-share stocks have over 24% foreign ownership, indicating strong foreign interest in companies with global competitiveness [5] - Foreign investors are selectively investing in growth stocks, focusing on companies with sustainable performance and expanding market shares [6] Group 5 - Foreign capital is favoring high-dividend stocks and growth stocks, reflecting a dual strategy of defense and offense in investment [7] - High-dividend stocks are recognized for their stable cash flows and strong governance, while growth stocks represent long-term bets on China's economic transformation [8]

Wind数据显示，截至8月4日15:30，共有83家A股上市公司披露2025年半年报，社保基金出现在13家上市公司前十大流通股东名单中。 2025年二季度，社保基金新进成为4家上市公司的前十大流通股东，对3家上市公司的持股数量增加。根据已披露的半年报，截至二季度末，社保基金合计持 股数量达1.60亿股，持股市值为41.26亿元（按照二季度末收盘价计算）。 从社保基金持仓市值排名看，社保基金对海大集团的持仓市值达12.32亿元，位居第一；藏格矿业、海信家电的持仓市值分居第二、第三位，分别达7.73亿 元、4.60亿元。此外，社保基金对东方雨虹持仓市值超4亿元，对宏发股份持仓市值超3亿元。 | 代理 | 名称 | | 培设量(同時) | | | | --- | --- | --- | --- | --- | --- | | | | 45.El. | (स्प्रेस) | 上期 | ↓本目 | | 002311.SZ | ：海大集团 | 2.103.4350 | 1.015.0118 | 1.088.4232 : | 123,240.26 | | 000408.SZ | ：藏格矿业 | 1,812.0000 | ...

Group 1 - The core viewpoint of the report is that Hongfa Technology (600885.SH) is rated as "better than market" due to its strong position in the high-demand electric vehicle industry and the high prosperity of high-voltage direct current relays [2] - The company is expected to benefit from the steady growth of traditional relay industries, indicating a diversified revenue stream [2] - New products from the company are anticipated to see continuous volume growth, which could enhance overall performance [2]

Investment Rating - The report maintains a "Positive" investment rating for the industry [5] Core Viewpoints - The report emphasizes the ongoing "anti-involution" trend in the photovoltaic industry, which is expected to drive price increases and improve profitability across the supply chain [16][36] - The energy storage sector is experiencing sustained demand growth, with significant project developments and favorable policy support [39][44] - The lithium battery segment shows stable demand, with advancements in solid-state technology and materials innovation [39][44] - The wind power sector is benefiting from increased offshore project activity and recovery in profitability [39][44] - The power equipment sector is seeing positive developments from high-voltage projects and international demand [39][44] - New directions in AI and robotics are highlighted as emerging investment opportunities, particularly in the context of increased capital expenditure from major manufacturers [39][44] Summary by Sections Photovoltaic - The photovoltaic industry is witnessing a price increase in key materials, with polysilicon prices rising to 49-55 CNY/kg and silicon wafer prices increasing by approximately 0.1 CNY per piece [22][25] - The government is pushing for the elimination of low-price competition and the orderly exit of outdated production capacity, with mergers and acquisitions in the polysilicon sector expected to progress in Q3 [16][36] - Recommended stocks include Tongwei Co., GCL-Poly, LONGi Green Energy, and Aiko Solar [16][36] Energy Storage - In H1 2025, major energy storage projects across 21 regions reached a total capacity of 124 GWh, with significant contributions from Inner Mongolia, Shandong, and Guangdong [41][42] - The report highlights the increasing stability of the energy storage market, with a positive outlook for domestic demand and pricing [39][44] - Recommended stocks include Sungrow Power Supply and Deye Technology [39][44] Lithium Batteries - The lithium battery sector is characterized by stable demand and a focus on solid-state battery technology, with companies like CATL and other second-tier players expected to benefit [39][44] - The report notes the importance of material innovations such as lithium metal anodes and nickel-iron current collectors [39][44] - Recommended stocks include CATL, Xiamen Tungsten, and Putailai [39][44] Wind Power - The offshore wind sector is accelerating project construction, with expectations for increased profitability in the second half of the year [39][44] - Recommended stocks include Mingyang Smart Energy and Zhongji Lingnan [39][44] Power Equipment - The report indicates that high-voltage projects have been approved, with overseas demand expected to rise [39][44] - Recommended stocks include Pinggao Electric and XJ Electric [39][44] New Directions - The report highlights advancements in humanoid robotics and AI applications, with significant capital expenditure from major companies [39][44] - Recommended stocks include Sanhua Intelligent Controls and Zhejiang Rongtai [39][44]

Investment Rating - The investment rating for the company is "Outperform the Market" (maintained) [2][7][8] Core Views - The company is a global leader in the relay industry, continuously increasing its global market share and achieving steady growth in performance. The report maintains the original profit forecast, expecting the company to achieve net profits of 1.939 billion, 2.121 billion, and 2.339 billion yuan for 2025-2027, representing year-on-year growth of 19%, 9%, and 10% respectively [3][7]. Financial Performance Summary - In the first half of 2025, the company achieved revenue of 8.35 billion yuan, a year-on-year increase of 15.4%, and a net profit attributable to shareholders of 964 million yuan, up 14.2% year-on-year. The gross margin was 34.2%, down 0.5 percentage points year-on-year, while the net margin remained flat at 15.3% [3][4]. - For Q2 2025, the company reported revenue of 4.36 billion yuan, a year-on-year increase of 26% and a quarter-on-quarter increase of 9.5%. The net profit for Q2 was 550 million yuan, up 13% year-on-year and 35% quarter-on-quarter. The gross margin for Q2 was 34.6%, up 0.9 percentage points quarter-on-quarter, and the net margin was 16.8%, up 3.1 percentage points quarter-on-quarter [3][4]. Business Segment Performance - The high-voltage direct current relay segment is expected to contribute a revenue growth rate of 35%-40% year-on-year in 2025, driven by the high demand in the new energy vehicle industry. The company currently holds a global market share of over 40% in this segment [4][5]. - The traditional relay segment is also expected to grow steadily, with household appliance relays projected to see a year-on-year shipment increase of 5%-10% in 2025. The new energy storage relay segment is anticipated to maintain a year-on-year growth rate of 35%-40% due to strong domestic and overseas demand [5]. - The automotive relay segment is expected to grow by 15%-20% year-on-year in 2025, benefiting from the rapid growth of the new energy vehicle industry and an increase in market share [5]. New Product Development - The company is promoting the development of new product categories, including low-voltage electrical appliances, film capacitors, connectors, current sensors, and fuses. Some of these products have already begun to be applied in various downstream applications and have passed certification, indicating potential for sustained growth in the future [6].

Investment Rating - The report maintains an "Outperform" rating for the electric equipment and new energy industry [1]. Core Insights - The sales of new energy vehicles (NEVs) in July were impressive, with the State Council's meeting emphasizing the need to regulate competition in the NEV industry, which is expected to benefit the sector's development. The introduction of new models in the second half of the year is anticipated to sustain high growth in domestic NEV sales, driving demand for batteries and materials [1][2]. - In the solid-state battery sector, Guoxuan High-Tech has officially initiated the design work for its first-generation solid-state battery production line, indicating a clear trend towards industrialization in this area. Attention should be paid to the progress of related materials and equipment companies [1][2]. - In the photovoltaic sector, the central economic work conference has called for a comprehensive rectification of "involutionary" competition, aiming to guide companies to enhance product quality and facilitate the orderly exit of outdated capacities. The Ministry of Industry and Information Technology has issued a notice regarding energy-saving supervision tasks for the polysilicon industry in 2025, maintaining a focus on energy consumption [1][2]. Summary by Sections Industry Overview - The electric equipment and new energy sector experienced a decline of 2.62% this week, with the wind power sector slightly increasing by 0.06%. The NEV index fell by 0.30%, while the lithium battery index saw a significant drop of 6.26% [2][10][13]. Key Industry Information - NEV deliveries in July included BYD with 344,300 units (up 1% year-on-year), Leap Motor with 50,100 units (up 127%), and Xpeng with 36,700 units (up 229%). However, Li Auto and NIO saw declines of 40% and 3%, respectively [2][27]. - The Ministry of Industry and Information Technology has issued a notice for energy-saving supervision in the polysilicon industry, and the China Electricity Council predicts an addition of 400 GW of new energy generation capacity by 2025 [2][27]. Company Developments - Contemporary Amperex Technology Co., Ltd. (CATL) reported a 33.33% year-on-year increase in net profit to CNY 30.485 billion for the first half of the year [30]. - Container Technology Co., Ltd. announced a stock issuance plan approved by the China Securities Regulatory Commission [30]. - The report highlights various companies' performance, including a significant loss reported by Rongbai Technology and a profit increase for Hongfa Technology [30]. Price Observations - The report notes that the prices of polysilicon and photovoltaic materials have shown fluctuations, with polysilicon prices stabilizing around CNY 49-55 per kg for dense materials and CNY 43-46 per kg for granular materials [15][19]. - The average price of silicon wafers has increased, with 183N wafers rising to CNY 1.20 per piece and 210N wafers reaching CNY 1.55 per piece [16][21]. Market Dynamics - The report emphasizes the importance of supply chain adjustments and the impact of international policies on pricing and demand in the photovoltaic sector, particularly in relation to the U.S. market [20][24].

Group 1: Ruizi Pharmaceutical - Ruizi Pharmaceutical is optimizing its management system and enhancing market marketing and customer expansion under the leadership of CEO Hu [1] - The company has established a "full-package service" development strategy, focusing on one-stop service capabilities from target discovery to IND application [1] - The company has localized its DeepSeek platform for AI applications in experimental data analysis, report generation, and knowledge graph construction [1] - The core competitiveness lies in its deep technical accumulation and comprehensive one-stop service capabilities [1] - The company has no plans to spin off its large molecule CDMO business and has completed long-term asset depreciation and personnel structure optimization [1] - Pharmacology and pharmacokinetics business has surpassed 50% of total revenue, with orders for large molecules slightly exceeding those for small molecules [1] Group 2: Hongfa Co., Ltd. - In the first half of 2025, Hongfa Co., Ltd. achieved high-quality growth with multiple business areas experiencing rapid growth, with per capita revenue reaching 654,000 yuan, an increase of 8.9% year-on-year [2] - Gross margin is significantly influenced by the growth rate of business scale, with continuous improvement in per capita efficiency driving gradual increases in gross margin [2] - The company has solidified its market position with high-quality automotive relay products and has received customer recognition for its high-capacity control box products [2] - The increasing penetration rate of electric vehicles in Europe is expected to benefit the company, with further strengthening of its market layout in Europe [2] - Industrial relays have shown good recovery growth, with a favorable competitive landscape in the industry [2] - The high-capacity control box initially served Toyota and has since expanded to leading domestic automotive manufacturers and battery factories, actively exploring overseas markets [2] - The company has put its production bases in Indonesia and Germany into operation, supported by a core management team with rich experience [2] - The relay business continues to consolidate its leading advantage, with new product categories expected to enter a rapid development track [2] - Order intake and backlog maintain a favorable outlook, with a stable global economic environment likely to sustain good market conditions [2]

Group 1 - The core viewpoint of the news is that Hongfa Technology has achieved high-quality growth in the first half of 2025, with significant growth across multiple business areas and a per capita revenue of 654,000 yuan, representing a year-on-year increase of 8.9% [1] - The gross profit margin is significantly influenced by the growth rate of business scale, with continuous improvement in per capita efficiency driving the gradual increase in gross profit margin [1] - The automotive relay products have excellent quality, and the high-capacity control box products have gained customer recognition, solidifying the company's market position [1] Group 2 - The penetration rate of electric vehicles in Europe is increasing, and the company is expected to continue benefiting from this trend, with further strengthening of its market layout in Europe [1] - The industrial relay business has shown good recovery growth, with a diversified downstream application field and a favorable industry competition landscape [1] - The high-capacity control box initially served Toyota and has since expanded to leading domestic automotive manufacturers and battery factories, actively exploring overseas markets [1] Group 3 - The company has established production bases in Indonesia and Germany, with a core management team that possesses rich experience [1] - The relay business continues to consolidate its leading advantage, and new product categories are expected to enter a rapid development track [1] - The order intake and backlog maintain a good level of prosperity, and a stable global economic environment is expected to sustain this positive outlook [1]