Summary of Huagong Technology Conference Call Company Overview - **Company**: Huagong Technology - **Industry**: Laser and Intelligent Manufacturing, Sensor Technology, 3D Printing, and Smart Factory Solutions Key Financial Highlights - **Net Profit**: 4.1 billion CNY in Q3 2025, up 31.15% YoY [2][4] - **Net Profit (Excluding Non-recurring Items)**: 3.7 billion CNY in Q3 2025, up 40.2% YoY [2][4] - **Operating Cash Flow**: Positive at 3.13 billion CNY, compared to a negative 10.55 million CNY in the same period last year [2][5] - **Earnings Per Share**: 1.31 CNY, up 40.86% YoY [2][5] - **Return on Equity**: 12.55%, an increase of 2.69 percentage points YoY [2][5] - **Total Assets**: 226.5 billion CNY, up 14.86% YoY [5] Business Segment Performance - **Laser and Intelligent Manufacturing**: Revenue of 26.5 billion CNY, up 6% YoY; net profit of 3.27 billion CNY, with a gross margin of 33.06% [2][7] - **Intelligent Equipment**: Revenue of 12 billion CNY, up 22% YoY, driven by demand from the new energy vehicle and shipbuilding industries [2][7] - **Zhengyuan Company**: Revenue of 50 billion CNY, up 52% YoY; net profit increased by 541% [2][7] - **Sensor Business**: Revenue of 28 billion CNY, up 14% YoY; net profit growth of 13% [2][8] Research and Development - **R&D Investment**: 6.79 billion CNY in the first three quarters, up 26.6% YoY [2][6] - **Focus Areas**: Optical connectivity, laser and intelligent manufacturing, sensing, and industrial software [2][9] - **Future Projects**: Plans to initiate 100 sub-projects next year to ensure business growth [2][9] International Expansion - **Strategic Focus**: Internationalization is a core strategy, with ongoing overseas business development [2][10] - **800G LPO Product**: Already delivered in Thailand, with a major order expected in October [2][11] - **US Market Outlook**: Strong demand anticipated, with expectations of 20% market share for LPO and LO products next year [3][12][13] Market Demand and Production Plans - **2026 US Market Demand**: Expected demand for optical modules between 40 to 50 million units [4][13] - **Production Scale Expansion**: Plans to increase production capacity to meet growing orders [4][13] - **AI Market**: Optical module gross margin exceeded 20% in H1 2025, reaching 27% in Q3 [4][21] Cost Management and Profitability - **Cost Control**: Continued focus on managing costs and expenses [2][9] - **Gross Margin Improvement**: Driven by product structure optimization and market demand shifts [4][30] Future Outlook - **2026 Revenue Forecast**: Anticipated revenue of around 18 billion CNY for the year [2][9] - **H Share Issuance**: Preparations underway for H share issuance to support overseas expansion and optimize shareholder structure [2][26][27] - **Expected Delivery**: Anticipated delivery of over one million optical modules overseas in 2026 [2][29] Additional Insights - **3D Printing Business**: Collaboration with Luxshare Precision progressing well, with 2 million orders on hand [4][16] - **Smart Factory Solutions**: Significant progress in laser equipment applications, with expected orders of 15 to 16 billion CNY in the industry [4][18] - **Shipbuilding Orders**: Approximately 4 billion CNY in orders received in Q3, with more expected [4][17]

Core Viewpoint - Company reported strong financial performance in the first three quarters of the year, with significant growth in revenue and net profit, driven by advancements in sensor and connectivity businesses [1] Financial Performance - Company achieved operating revenue of 11.038 billion, a year-on-year increase of 22.62% - Net profit attributable to the parent company reached 1.321 billion, reflecting a year-on-year growth of 40.92% [1] Business Segments - **Perception Business**: Focused on the electric vehicle supply chain, expanding applications of sensors in niche markets, with revenue of 3.174 billion, up 13% year-on-year. Sensor business revenue was 2.853 billion, while laser holographic anti-counterfeiting business revenue was 321 million [1] - **Connectivity Business**: Emphasizing smart "optical + wireless" connections, the company delivered 400G and 800G optical modules, with revenue of 5.089 billion, a 52% increase year-on-year. Rapid growth in data communication product revenue was noted [1] Product Development and Market Outlook - The company began delivering 800G LPO optical modules in overseas factories in October, with expectations for increased production in Q4. The 1.6T optical module is being prepared for next year's ramp-up [2] - Anticipated demand for optical modules in overseas markets is projected to be between 40 million to 50 million units, with a focus on low-cost, low-power, and low-latency products for AI and supercomputing applications [2] - Domestic market demand for optical modules is also expected to grow, with plans to transition from 400G to 800G products, and an estimated demand of around 20 million units for next year, with 800G modules accounting for approximately 40% [2] Supply Chain and Manufacturing - The company has established long-term stable partnerships with key chip manufacturers, ensuring preparedness for increased demand by managing orders six months in advance. Current inventory can cover approximately three months [3] - The intelligent manufacturing segment reported revenue of 2.653 billion, with significant growth in high-power laser equipment [3] - The company is focusing on high-quality sectors such as new energy and intelligent manufacturing, with notable revenue growth in various product lines [3]

Core Viewpoint - The news highlights significant financial performance and strategic developments of various companies, indicating growth in sectors such as pharmaceuticals, technology, and materials, while also noting some companies facing challenges. Financial Performance - WuXi AppTec reported a net profit of 12.076 billion yuan for the first three quarters, a year-on-year increase of 84.84% [3] - Cambridge Technology achieved a net profit growth of 70.88% year-on-year for the first three quarters [4] - Zhenghai Magnetic Materials saw a net profit increase of 189.72% in the third quarter, attributed to rising rare earth prices [12] - Horizontal East Magnetic reported a 56.80% increase in net profit for the first three quarters [13] - Xiyang Co. reported a net profit growth of 35.99% for the first three quarters [13] Strategic Developments - WuXi AppTec plans to sell 100% equity of its subsidiaries for 2.8 billion yuan to focus on its CRDMO business model [6] - China Tungsten High-tech intends to acquire 99.97% equity of Hengyang Yuanjing Tungsten Industry for 821 million yuan [7] - Yiyiyuan plans to acquire 100% equity of a pet food company, with stock resuming trading [9] - United Optoelectronics is selling radar-related assets and increasing investment in Millimeter Automotive [10] Market Demand and Supply - Huagong Technology's 800G LPO optical modules have started delivery overseas, with an expected domestic demand of around 20 million units next year [2] - Cambridge Technology anticipates increased demand for high-speed optical modules and telecom broadband products [4] Other Notable Announcements - Han's Information has authorized management to initiate preparations for H-share issuance and listing [28] - Sifang Precision plans to issue shares overseas and list on the Hong Kong Stock Exchange [29] - Dongsheng Technology has achieved batch supply of solid-state battery materials exceeding 20 tons [35]

Core Viewpoint - The company has commenced the delivery of its 800G LPO optical modules in overseas factories as of October, with expectations for increased production in Q4 of this year [1] Group 1: Product Development and Market Demand - The company is preparing for the ramp-up of its 1.6T optical module products for next year [1] - The overall demand in the overseas market is projected to be between 40 million to 50 million units, indicating a potential for further adjustments and increases [1] - The company anticipates an increase in product types, with LPO and LRO optical modules expected to become mainstream solutions due to their advantages in low cost, low power consumption, and low latency, which are critical for AI and supercomputing applications [1] Group 2: Capacity Expansion - The company is making preparations for capacity expansion in anticipation of future order increases [1]

Core Viewpoint - The company, Huagong Technology, is leveraging its technological advancements and proactive layout to expand application scenarios in the 3C industry, having developed 3D printing laser processing equipment and achieved self-controllable technology across various components [1] Group 1 - The company has achieved the first batch of orders in October and plans to further scale its business from Q4 this year to 2026 [1] - The company is actively collaborating with major industry clients to promote the introduction and validation of its technologies [1] - The company has established a comprehensive technology system covering materials, light sources, equipment, and powder processing systems [1]

Core Viewpoint - Huagong Technology Industry Co., Ltd. (hereinafter referred to as "Huagong Technology") held a conference call on October 24, 2025, attracting participation from 93 institutions, including major investment firms. The management discussed the company's operational performance for the first three quarters of 2025, core business progress, and future strategic planning [1][2]. Financial Performance Overview - For the first three quarters of 2025, Huagong Technology reported revenue of 11.038 billion yuan, a year-on-year increase of 22.62%. The net profit attributable to the parent company was 1.321 billion yuan, reflecting a year-on-year growth of 40.92%, significantly outperforming the industry average [2][3]. Core Business Development - **Perception Business**: Focused on sectors like new energy vehicles and photovoltaic energy storage, achieving revenue of 3.174 billion yuan, a year-on-year increase of 13%. The sensor business generated 2.853 billion yuan, while the laser holographic anti-counterfeiting business contributed 321 million yuan [3]. - **Connection Business**: Benefiting from the surge in AI computing demand, revenue from 400G/800G optical modules increased by 52% to 5.089 billion yuan. The data communication product revenue and profit contributions saw significant growth [3]. - **Intelligent Manufacturing Business**: Capitalizing on the intelligent transformation opportunities in shipbuilding and new energy vehicles, the company received bulk orders for high-end products like laser cutting and welding integrated systems, with order growth outpacing the industry average [3]. Connection Business Insights - The connection business generated 5.089 billion yuan in revenue for the first three quarters, a 52% year-on-year increase. The third-quarter revenue was 1.427 billion yuan, showing a slight decline due to fluctuations in terminal equipment and telecom optical module demand. However, the demand for data communication optical modules remained strong. The net profit for this business surged by 541%, with a gross margin increase to 13.66% due to a higher proportion of high-value data communication products [5]. Intelligent Manufacturing Growth - The shipbuilding sector is a significant growth area for the intelligent manufacturing business, currently experiencing a high prosperity cycle with ample orders. The company’s laser cutting and welding integrated systems have been widely applied, improving efficiency by 7-10 times compared to traditional arc welding processes. The company is also working on establishing standards for laser composite welding, which is expected to further expand market opportunities [6]. New Business Developments - In emerging business areas, Huagong Technology's 3D printing business has made breakthroughs, with initial orders for laser processing equipment in the 3C industry. The sensor business has also seen significant overseas expansion, particularly in the new energy vehicle sector. The company is planning to issue H-shares as part of its global strategy, aiming to support overseas production base construction and optimize shareholder structure [7].

Group 1: Financial Performance - The company achieved a revenue of 11.038 billion CNY, representing a year-on-year growth of 22.62% [7] - The net profit attributable to the parent company was 1.321 billion CNY, with a year-on-year increase of 40.92% [7] - The connection business generated a revenue of 5.089 billion CNY, showing a significant growth of 52% [8] Group 2: Business Segments - The perception business focused on the automotive sensor market, achieving a revenue of 3.174 billion CNY, a 13% increase [8] - The laser and intelligent manufacturing business generated a revenue of 2.653 billion CNY, with notable growth in high-power laser equipment [10] - The connection business's revenue from data communication products saw a rapid increase, contributing to the overall growth [11] Group 3: Market Expansion and Strategy - The company is actively expanding its global business and accelerating the construction of overseas production bases [7] - The company plans to issue H shares to support overseas production base construction and attract long-term foreign investment [19] - The company has established stable partnerships with core chip manufacturers to ensure material supply for future growth [14] Group 4: Future Outlook - The company anticipates a strong demand for optical modules in both domestic and overseas markets, with an expected demand of 40-50 million units [12] - The shipbuilding industry is experiencing a high boom cycle, with sufficient orders in hand, indicating a promising growth trajectory [15] - The company aims to enhance its 3D printing business, with plans to expand its scale significantly by 2026 [16]

Group 1 - The latest QFII holdings have attracted market attention, with 190 heavily held stocks appearing in 29 foreign institutional combinations during the third quarter reporting period [1] - Notable increases in holdings were observed from the Abu Dhabi Investment Authority, which significantly increased its positions in stocks such as Baofeng Energy and China National Materials, with a total market value of 1.764 billion yuan [1] - Morgan Stanley International holds 42 A-shares with a total market value of 2.874 billion yuan, focusing on stocks like Siyuan Electric and Guanghuan Xinwang [2] Group 2 - Morgan Chase Securities covers over 70 A-shares with a combined market value of 2.885 billion yuan, heavily investing in stocks like Shengtun Mining and Huijin Co [2] - QFII has shown interest in advanced manufacturing, conducting research on companies such as Shenghong Technology, Jiuzhou Pharmaceutical, and others [2] - The most held company by QFII is China Western Electric, with significant foreign holdings also in Siyuan Electric, Huagong Technology, and Baofeng Energy, each exceeding 500 million yuan in market value [2]

Core Viewpoint - Huagong Technology plans to issue H-shares and list on the Hong Kong Stock Exchange to enhance its global strategy, broaden financing channels, and optimize its capital structure [1][3] Financial Performance - For the first three quarters of 2025, the company reported revenue of 11.038 billion yuan, a year-on-year increase of 22.62%, and a net profit attributable to shareholders of 1.321 billion yuan, with a growth rate of 40.92% [3] - Despite a 10.33% year-on-year decline in third-quarter revenue to 3.409 billion yuan, the net profit still achieved a 31.15% year-on-year growth, with a gross margin increase to 24.96% due to high-end product optimization and cost control [3] Business Segments - The company's core business performance supports the upcoming listing, with a significant 84% year-on-year increase in revenue from the optical module business, and high-end products (800G and above) accounting for 35% of sales [3] - The sensor business holds a 60% market share domestically, while orders for laser equipment in the new energy vehicle sector account for 94% [3] Market Environment - The current Hong Kong stock market provides a favorable environment for technology companies to list, with a strong recovery in the IPO market for 2025, driven by the technology sector [3] - Recent reforms at the Hong Kong Stock Exchange have attracted more mainland technology companies [3] Analyst Ratings - Guojin Securities has given Huagong Technology a "buy" rating, suggesting that the fundraising will accelerate growth in its optoelectronic device business [3] Challenges - The company faces challenges, including a 174.47% year-on-year increase in accounts receivable and a gross margin that still lags behind competitors like Zhongji Xuchuang [4] - The sensitivity of the Hong Kong market to valuation fluctuations for technology companies will be a concern [4] - Future focus will be on the company's technological competitiveness and progress in internationalization [4]

Group 1: Core Strategy - Company announced the issuance of H-shares and plans to list on the Hong Kong Stock Exchange, aiming to deepen its global strategy and enhance international visibility [2][3] - The H-share listing is expected to simplify international acquisition processes and optimize the capital structure, potentially facilitating overseas technology and industry collaborations [2][6] Group 2: Industry Expansion - Company plans to establish the "Hua Gong Future Fund" with a total investment of up to 98 million yuan, focusing on AI, robotics, medical integration, and low-altitude economy [5][6] - The fund will connect various research resources to incubate technology and create new growth points, enhancing the company's existing laser business [6] Group 3: Financial Performance - For the first three quarters of 2025, the company reported revenue of 11.038 billion yuan, a year-on-year increase of 22.62%, and a net profit of 1.321 billion yuan, up 40.92% [7][8] - Despite a slight decline in revenue in the third quarter, net profit increased by 31.15%, demonstrating strong profitability and cost control [8] Group 4: Future Outlook - The combination of H-share plans and the establishment of the fund outlines a clear path for the company's collaborative development of capital, industry, and technology [9] - Successful H-share listing could position the company as a leading player in the laser industry, leveraging international capital for technology acquisitions and local innovation [9]