Summary of Silver Wheel Co., Ltd. Conference Call Company Overview - **Company**: Silver Wheel Co., Ltd. (银轮股份) - **Key Clients**: Caterpillar, Tesla, Google, MV - **Market Focus**: North America, particularly in gas engine and data center power solutions Core Insights and Arguments - **Caterpillar Partnership**: - Collaboration with Caterpillar in the gas engine sector is expected to yield orders worth 6-7 billion, contributing over twice the profit of the main business starting from the second half of 2026 [2][3] - Silver Wheel is projected to supply 2,000-3,000 cooling modules in 2026, with annual growth expected to double, reaching around 8,000 units by 2028, priced at approximately $20,000 each [6] - **Data Center Power Demand**: - The surge in AI demand and aging power grids in the U.S. have created a mismatch, making data center power generation a hot topic [4] - The U.S. is expected to face a power shortfall of 140 GW due to data centers over the next five years, with significant demand for gas engines and solid oxide fuel cells (SOFC) [5] - **Market Potential for Medium-Speed Engines**: - The medium-speed engine market is projected to have a demand of 5,000-7,000 units annually, with a power output of 2-3 MW per unit [5] - **Natural Gas Power Equipment Demand**: - The demand for natural gas power equipment is expected to explode, with Caterpillar's shipments projected to increase from a few hundred units in 2025 to around 6,000 units in 2026 [8] - Silver Wheel's components for these systems are valued at approximately $15,000 per set, contributing over 6 billion in revenue and nearly 2 billion in profit from 2026 to 2027 [8] Additional Important Insights - **Liquid Cooling Business**: - Silver Wheel has entered the liquid cooling market, collaborating with North American clients and Taiwanese manufacturers, with expected profits exceeding 1 billion RMB from new orders [9] - Google has invited Silver Wheel to replace its previous supplier, indicating strong growth potential in this segment [9] - **Overall Performance Outlook**: - Historical revenue growth from 2019 to 2024 has averaged 16%, with expectations of over 20% growth in the coming years due to balanced business segments and broad regional distribution [10] - The overall market capitalization is projected to exceed 100 billion RMB, driven by various business segments including automotive, robotics, liquid cooling, and natural gas power equipment [11] - **Emerging Business Growth and Revenue Realization**: - Caterpillar's delivery of around 1,000 natural gas power units this year is expected to contribute to profits, while liquid cooling orders are set to ramp up in the second half of the year [12] - Long-term revenue projections indicate a high certainty of reaching at least 10 billion RMB in income from emerging businesses [12]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 55.87 CNY, based on a comparable company PE average valuation of 37 times for 2026 [3][6]. Core Insights - The company is expected to benefit from the long-term growth elasticity brought by gas generator-related supporting products, which will contribute to profitability [2][10]. - The company is positioned to enter the exhaust treatment product supply chain for gas generators, anticipating a significant increase in profitability as overseas clients expand their gas and diesel generator production [10]. Financial Forecasts - The projected earnings per share (EPS) for 2025-2027 are 1.14 CNY, 1.51 CNY, and 1.93 CNY respectively [3]. - Revenue is expected to grow from 11,018 million CNY in 2023 to 21,502 million CNY in 2027, with a compound annual growth rate (CAGR) of approximately 18.5% [5][11]. - Operating profit is forecasted to increase from 816 million CNY in 2023 to 2,107 million CNY in 2027, reflecting a strong growth trajectory [5][11]. Key Financial Metrics - The company’s gross margin is projected to improve from 20.5% in 2023 to 21.7% in 2027, while net profit margin is expected to rise from 5.6% to 7.6% over the same period [5][11]. - The return on equity (ROE) is anticipated to increase from 12.1% in 2023 to 17.7% in 2027, indicating enhanced profitability and efficiency [5][11].

Core Viewpoint - The internationalization strategy is a significant initiative for the long-term development goals of the company, which has been in progress since 2010 and has evolved through various stages of overseas expansion and operational improvement [1] Group 1: Internationalization Strategy - The internationalization strategy has been developed over 16 years, involving the establishment of overseas offices, warehousing services, international trade companies, and acquisitions of technology-driven overseas firms [1] - The company has transitioned from significant losses in its overseas subsidiaries to gradually achieving profitability, demonstrating the effectiveness of its long-term overseas efforts [1] Group 2: Strategic Partnerships and Growth - The company has built strong strategic partnerships with leading global clients in various industries, including commercial vehicles, off-road vehicles, passenger cars, power equipment, AI liquid cooling, and embodied intelligence [1] - The strategic value of the company's overseas layout has become evident, with all business lines entering a phase of accelerated growth in capacity expansion, customer development, and order acquisition [1] Group 3: Sustainable Growth - The company has established a development pattern that combines growth potential with stability, laying a solid foundation for long-term sustainable growth through its robust overseas layout and clear business growth trajectories [1]

Core Viewpoint - The company is committed to strengthening its global strategic layout and enhancing its core competitiveness in overseas markets, with confidence in achieving breakthroughs in key areas such as top liquid cooling clients, top power energy clients, and top embodied intelligence clients [1] Group 1 - The company aims to continuously solidify its global strategy [1] - The company expects significant enhancement in growth momentum and performance elasticity as new businesses accelerate and scale gradually release [1]

Core Viewpoint - The company has segmented its business into four major sectors: Automotive, Power Energy, Digital Energy (AI Liquid Cooling), and Embodied Intelligence, aligning with industry trends and its own development strategy [1] Group 1: Automotive Sector - The automotive business serves as the company's foundation, covering both passenger and commercial vehicles. It is expected to maintain steady growth due to market share enhancement, increased product value, and high growth in overseas markets [1] Group 2: Power Energy Sector - The power energy sector is benefiting from explosive growth in overseas AI data centers, with downstream clients continuously expanding diesel (including backup and power generation) and gas generator units. The company has entered mass production for diesel generator cooling and is preparing capacity for gas generator-related businesses. The high product value in this sector, combined with a long-term power supply shortage in North America, is expected to provide significant growth potential [1] Group 3: Digital Energy (AI Liquid Cooling) Sector - This sector focuses on four application areas: data centers, energy storage, charging and swapping, and low-altitude economy, with data center liquid cooling products at its core. The company is advancing product testing and capacity planning with leading global liquid cooling clients, and several key projects have shown positive progress. This sector is anticipated to experience rapid growth over the next 2-3 years [1] Group 4: Embodied Intelligence Sector - The company has defined a product layout of 1+4+N, where 1 represents a comprehensive understanding of the entire system to meet customer needs. The 4 refers to four types of assembly products: rotary joint modules, actuator modules, dexterous hand modules, and thermal management modules. N includes various components supporting these four modules, such as motor modules, micro motors, body structure parts, and heat exchangers. The company has established collaborations with key clients, with some product categories already in supply and others in development [1]

Core Viewpoint - The company is strategically focusing on four main business segments: Automotive, Power Energy, Digital Energy (AI Liquid Cooling), and Embodied Intelligence, with an emphasis on international expansion and collaboration with global leading clients to drive growth and stability. Group 1: Business Structure and Trends - The company has segmented its operations into four key areas: Automotive, Power Energy, Digital Energy (AI Liquid Cooling), and Embodied Intelligence [3][4] - The Automotive segment is expected to maintain steady growth driven by market share increase, product value enhancement, and overseas market expansion [3][4] - The Power Energy segment benefits from the explosive growth of overseas AI data centers, with diesel generator cooling now in mass production and gas generator business in development [3][4] - The Digital Energy segment focuses on data centers and other applications, with liquid cooling products at its core, anticipating rapid growth in the next 2-3 years [4] - The Embodied Intelligence segment employs a 1+4+N product layout, collaborating with key clients, with some products already supplied and others in development [4] Group 2: Internationalization Strategy - The internationalization strategy, initiated in 2010, has evolved over 16 years, transitioning from establishing offices to building manufacturing bases, resulting in profitable overseas subsidiaries [5][6] - The company has developed a strong international talent pool and operational experience, forming strategic partnerships with leading global clients across various industries [5][6] - The strategic value of the international layout is becoming evident, with accelerated capacity expansion, customer acquisition, and order growth across all business lines [6] Group 3: Future Outlook - The company aims to solidify its global strategy and enhance its core competitiveness in key markets, expecting significant breakthroughs with leading clients in liquid cooling, power energy, and embodied intelligence sectors [6]

Core Viewpoint - The company has defined a "1+4+N" product layout for its embodied intelligence sector, indicating a strategic approach to product development and customer collaboration [1] Group 1: Product Layout - The "1" in the layout represents the understanding and cognition of the entire machine system [1] - The "4" includes four key modules: rotary joint module, actuator module, dexterous hand module, and thermal management module [1] - The "N" signifies supporting components such as motor modules, micro motors, body structural parts, and heat exchangers [1] Group 2: Customer Collaboration - The company has established partnerships with several leading clients, indicating a strong market presence [1] - Some product categories are already in supply, while others are still in the development phase [1]

Group 1 - The core viewpoint of the article highlights that the electric power energy sector is benefiting from the explosive growth of overseas AI data centers, leading to continuous expansion of downstream customers in diesel (including backup and power generation) and gas generator sets [1] - The company’s product offerings in the generator field primarily include generator cooling and exhaust emission treatment [1] - The diesel generator (backup power) cooling business has entered the mass production stage, while the gas generator-related business is in the development and capacity preparation phase [1]

Group 1: Business Structure and Development Trends - The company has divided its business into four main segments: Automotive, Power Energy, Digital Energy (AI Liquid Cooling), and Embodied Intelligence [2][3] - The Automotive segment is expected to maintain steady growth, supported by market share increase and high growth in overseas markets [2] - The Power Energy segment is benefiting from explosive growth in overseas AI data centers, with significant demand for diesel and gas generator sets [3] Group 2: Internationalization Strategy and Importance - The internationalization strategy, initiated in 2010, has evolved through establishing overseas offices, warehouses, and manufacturing bases, leading to a gradual transition from losses to profitability [4] - The company has built strong strategic partnerships with global leaders in various sectors, enhancing its international operational experience [4] - The overseas business lines are entering a phase of accelerated growth, with increased capacity expansion and customer acquisition [4][5] Group 3: Future Outlook for New Business Areas - The company aims to strengthen its global strategy and enhance competitiveness in key areas such as AI liquid cooling, power energy, and embodied intelligence [5] - As new businesses accelerate and scale up, significant growth momentum and performance elasticity are expected [5]

Summary of Key Points from Conference Call Records Industry Overview - The demand for diesel generators is surging, with global demand expected to reach 16,000 units by 2025, and the U.S. market commanding a high price of $500,000 per unit, indicating significant market size and price growth potential [1][4][5] - The trend of data centers adopting on-site power generation is becoming more pronounced, leading to increased demand for gas turbines, with Caterpillar reporting a significant rise in gas power generation orders [1][6] Company Insights Weichai Power (潍柴动力) - Weichai Power is expected to benefit from the increasing share of power energy products and capacity adjustments, which could enhance net profits and lead to a revaluation of its stock [1][3] - The company’s 16M33 gas generator has entered the high-end market in the Americas, with a power output comparable to Caterpillar, and is anticipated to secure primary power orders for data centers, projecting a net profit of approximately 12.5 billion RMB by 2027 [1][8] - The traditional business of Weichai Power is projected to yield a net profit of 12.5 billion RMB in 2027, with an overall market capitalization potential of around 300 billion RMB, indicating a 30% upside from current levels [1][9] Yinlun (银轮股份) - Yinlun has made significant progress in the gas generator cooling module sector, with ASP increasing from $20,000 to $150,000-$200,000, leading to substantial revenue and profit growth [1][11] - The company is also advancing in the AI server liquid cooling business, targeting major U.S. clients like NV, Meta, and Google, which could further expand its market share and profitability [2][12][13] - Yinlun's traditional business is expected to maintain double-digit growth, supported by operational efficiency improvements [15] Market Dynamics - The electric power landscape is changing significantly due to AI technology, impacting the automotive sector, particularly in the fields of gas and diesel engines [3] - Caterpillar and Cummins are leading players in the gas generator market, with Caterpillar planning to deliver approximately 1,200 units of 1.5 MW equipment in 2026 and at least 4 GW in 2027 to meet demand [10] Future Growth Areas - Yinlun is focusing on several growth areas, including traditional vehicle thermal management, AI server liquid cooling, gas generator modules, and robotics, which are expected to contribute to significant revenue and market capitalization growth [18] - The digital energy business, including photovoltaic thermal management and semiconductor thermal management, is also projected to achieve double-digit growth [16] Conclusion - Both Weichai Power and Yinlun are positioned to capitalize on the growing demand for power generation solutions and advanced cooling technologies, making them attractive investment opportunities in the current market landscape [1][7][18]