Summary of Gaolan Co., Ltd. Conference Call Company Overview - **Company**: Gaolan Co., Ltd. (高澜股份) - **Industry**: Thermal management and cooling solutions, particularly in high voltage and data center applications - **Market Position**: Leading player in ultra-high voltage pure water cooling with approximately 70% market share [8][20] Key Points and Arguments Business Performance - **Order Growth**: Orders increased from less than 600 million CNY on June 30, 2024, to nearly 1.139 billion CNY by June 30, 2025, representing a doubling in growth [9][22] - **Revenue Forecast**: Expected revenue from data center business to exceed 300 million CNY in 2024, a 50% year-on-year increase [3][10] - **Main Business Recovery**: The main business has shown signs of stabilization and recovery, with a positive outlook for 2026 due to a strong order backlog [5][11] Industry Dynamics - **Market Trends**: The upgrade from GB200 to GB300 standards is anticipated to significantly enhance liquid cooling penetration and improve pricing and volume [2][6] - **Electricity Demand**: Continuous growth in domestic electricity demand, with significant investments planned by State Grid and Southern Grid, expected to benefit Gaolan [5][19] - **Data Center Growth**: The data center liquid cooling segment is essential for temperature control, expected to grow alongside the rapid expansion of data centers and AI servers [10][24] Technological and Competitive Advantages - **Technical Expertise**: Gaolan has over 20 years of experience in thermal management, with advanced technology recognized both domestically and internationally [8][13] - **Product Range**: The company offers high-power electronic thermal management products and high-power density device thermal management products, catering to various sectors including data centers and energy storage [14][27] - **Patents and Standards**: Involvement in drafting numerous national and industry standards, holding over 300 patents, which strengthens its competitive position [13] International Expansion - **Overseas Market Entry**: Established a wholly-owned subsidiary in the U.S. to prepare for future overseas opportunities, although significant breakthroughs are still pending [7][20] - **International Orders**: Secured a 500 million CNY order in Saudi Arabia, with potential for further contracts in emerging markets [20] Future Outlook - **Growth Potential**: The company is positioned as a key player in AI computing, with potential for significant growth in the high-speed data center market [11][29] - **Investment Recommendation**: Analysts recommend focusing on Gaolan due to its recovery in main business and potential for growth, suggesting it is a good time for investors to pay attention [30] Additional Important Information - **Client Base**: Gaolan's clients include major players like State Grid, Southern Grid, CATL, ByteDance, Alibaba, and Tencent, indicating a strong market presence [9][10] - **Financial Performance**: Despite a revenue decline in 2023 due to the divestment of a subsidiary, a recovery is expected in 2025 with a projected profit turnaround [17][30] - **Liquid Cooling Technology**: The company is involved in various liquid cooling technologies, including cold plate and immersion cooling, with a focus on meeting the increasing demands of data centers [26][24]

Group 1: Banking Industry - The report tracks the progress of deposit migration from the perspective of financial system liquidity, indicating that the trend of deposit migration continues, reflected in the activation of deposits and increased activity in capital markets, although the pace has slightly slowed down due to three main factors: the front-loaded fiscal and credit monetary supply in the first half of the year, increased investor divergence after the stock market rise, and a slowdown in the return of foreign exchange funds amid export deceleration [5] - The estimated potential for deposit migration remains at 5-7 trillion yuan, suggesting that this trend may continue in the medium term despite the current slowdown [5] Group 2: Macroeconomy - The "14th Five-Year Plan" is a critical period for China's financial cycle and economic transformation, with the "15th Five-Year Plan" expected to enhance supply capacity while addressing debt and demand issues arising from real estate adjustments [7] - To maintain GDP growth within a certain range, a rebalancing of supply and demand is necessary, particularly in boosting demand through debt resolution, consumption promotion, and fiscal reforms [7] - Policies aimed at stimulating demand may also benefit supply in the long term, with a focus on technological innovation and the internationalization of the renminbi amid changes in the international monetary system [8] Group 3: Strategy - In August, while A-shares, particularly the STAR Market, were strong, Hong Kong stocks remained stagnant. However, in September, A-shares entered a phase of fluctuation while Hong Kong stocks gained momentum, supported by expectations of Federal Reserve easing and AI internet developments [10] - The report discusses the potential for market leadership among the three regions (China, Hong Kong, and the US) and identifies which industries may offer greater value [10] Group 4: Automotive and Components Industry - The trend towards liquid cooling solutions in data centers is driving increased demand for liquid cooling components, with domestic automotive parts companies leveraging their capabilities in thermal management to expand into this market [14] - The rise in AI chip power consumption is accelerating the application of liquid cooling solutions, enhancing the demand for core components like quick-connect fittings (UQD) [14] - The domestic supply chain possesses cost advantages and significant potential for domestic substitution in the liquid cooling market [14]

Investment Rating - The investment rating for the industry is "Outperform the Market" (maintained) [1] Core Viewpoints - The rapid development of efficient cooling technologies is driven by the increasing scale and power of data centers, with liquid cooling addressing high energy consumption and heat generation issues. By 2024, China's computing centers are expected to consume 166 billion kWh, accounting for 1.68% of the total electricity consumption in society [2] - The main liquid cooling technologies are cold plate and immersion cooling, with cold plate cooling being the most widely used due to its mature technology. Liquid cooling offers multiple advantages such as high heat exchange efficiency, energy savings, and reduced noise [2] - The market for cooling liquids is projected to grow significantly, with an estimated demand of approximately 89,000 tons of cooling liquid driven by the addition of AI data centers by 2028 [2] Summary by Sections 1. Main Cooling Pathways - Liquid cooling technology is categorized into indirect cooling (mainly cold plate) and direct cooling (including immersion and spray cooling). Cold plate cooling is the most widely used, while immersion cooling offers higher heat dissipation capabilities but at a higher operational cost [2][23] 2. Water-based Cooling Liquids - Water-based cooling liquids are primarily used in single-phase cold plate cooling, offering good thermal conductivity and low cost. However, they may pose risks of algae and bacteria growth [48][50] 3. Oil-based Cooling Liquids - Oil-based cooling liquids, including mineral oil and synthetic oil, are mainly used in single-phase immersion cooling. They are cost-effective but have drawbacks such as high viscosity and cleaning difficulties [53][56] 4. Fluorinated Cooling Liquids - Fluorinated cooling liquids are used in both single-phase and multi-phase immersion cooling. They offer excellent thermal properties and low toxicity but are relatively expensive [2][56] 5. Market Space Estimation - The liquid cooling market in China is expected to exceed 100 billion yuan by 2027, with a compound annual growth rate of 51.4% from 2019 to 2027 [17][18] 6. Commercialization of Liquid Cooling Technology - The commercialization of liquid cooling technology is increasing, with major IT companies like Alibaba, Baidu, and Tencent implementing successful liquid cooling applications [27][28]

Investment Rating - The report maintains an "Outperform" rating for the industry [1] Core Insights - The rapid growth of data centers and the increasing power demands necessitate efficient cooling technologies, with liquid cooling addressing high energy consumption and heat generation issues. By 2024, China's computing centers are expected to consume 166 billion kWh, accounting for 1.68% of the total electricity consumption [2][2] - The main liquid cooling technologies include cold plate and immersion cooling, with cold plate cooling being the most widely used due to its mature technology. Liquid cooling offers multiple advantages such as high heat transfer efficiency, energy savings, and reduced noise [2][2] - The market for cooling liquids is projected to grow significantly, with an estimated demand of approximately 89,000 tons for AI data centers by 2028, alongside 19,000 tons from traditional server installations [2][2] Summary by Sections 1. Main Cooling Paths - Liquid cooling technology is categorized into indirect cooling (mainly cold plate) and direct cooling (including immersion and spray cooling). Cold plate cooling is the most prevalent, while immersion cooling offers higher heat dissipation capabilities but comes with higher operational costs [2][2][2] 2. Water-Based Cooling Liquids - Water-based cooling liquids are primarily used in single-phase cold plate cooling, offering good thermal conductivity and low cost. However, they may pose risks of microbial growth [50][50] 3. Oil-Based Cooling Liquids - Oil-based cooling liquids, including mineral oil and synthetic oil, are mainly applied in single-phase immersion cooling. They are cost-effective and environmentally friendly but have lower thermal conductivity compared to synthetic alternatives [56][56] 4. Market Space Estimation - The liquid cooling market in China is expected to exceed 100 billion yuan by 2027, with a compound annual growth rate of 51.4% from 2019 to 2027 [17][17] 5. Commercialization of Liquid Cooling Technology - The commercialization of liquid cooling technology is increasing, with major IT companies like Alibaba, Baidu, and Tencent implementing successful liquid cooling applications [27][27]

Investment Rating - The report maintains an "Outperform" rating for the industry [1] Core Insights - The rapid growth of data centers and the increasing power demands necessitate efficient cooling technologies, with liquid cooling addressing high energy consumption and heat generation issues. By 2024, China's computing centers are expected to consume 166 billion kWh, accounting for 1.68% of the total electricity consumption [2][2] - The main liquid cooling technologies are cold plate and immersion cooling, with cold plate cooling being the most widely used due to its mature technology. Liquid cooling offers multiple advantages, including high heat exchange efficiency, energy savings, and reduced noise [2][2] - The market for cooling liquids is projected to grow significantly, with an estimated demand of approximately 89,000 tons for AI data centers by 2028 and an additional 19,000 tons from traditional server installations [2][2] Summary by Sections 1. Main Cooling Pathways - Liquid cooling technology is categorized into indirect cooling (mainly cold plate) and direct cooling (including immersion and spray cooling). Cold plate cooling is the most common, while immersion cooling offers higher heat dissipation capabilities but at a higher operational cost [2][2][2] 2. Water-Based Cooling Liquids - Water-based cooling liquids are primarily used in single-phase cold plate cooling, offering good thermal conductivity and low cost. However, they may pose risks of algae and bacteria growth [48][50] 3. Oil-Based Cooling Liquids - Oil-based cooling liquids, including mineral oil and synthetic oil, are mainly used in single-phase immersion cooling. They are cost-effective and environmentally friendly but have lower thermal conductivity compared to other options [53][56] 4. Market Space Estimation - The liquid cooling market in China is expected to exceed 100 billion yuan by 2027, with a compound annual growth rate of 51.4% from 2019 to 2027 [17][17] 5. Commercialization of Liquid Cooling Technology - The commercialization of liquid cooling technology is increasing, with major IT companies like Alibaba, Baidu, and Tencent implementing successful liquid cooling applications [27][27]

Group 1 - The core viewpoint of the article emphasizes the significant growth potential in the data center liquid cooling valve market, driven by an increase in demand and overseas capacity release [1] - The company’s products are widely used in data centers in Indonesia and North America, indicating a strong market presence and potential for sustained high growth [1] - The substrate market is expected to experience exponential growth due to the CPO node, with the company having made extensive preparations for mass production, positioning itself for rapid volume increase [1]

Core Viewpoint - The article emphasizes the growing trend of liquid cooling solutions in data centers, driven by the increasing power consumption of AI chips, which necessitates the adoption of liquid cooling technologies over traditional air cooling methods. This shift presents significant growth opportunities for automotive component companies expanding into the data center liquid cooling market [2][14]. Group 1: Liquid Cooling Technology and Market Dynamics - The demand for liquid cooling components is increasing due to the rising power consumption of AI chips, with NVIDIA's latest chips exceeding 1000W, making liquid cooling a necessity rather than an option [2][14]. - The Universal Quick Disconnect (UQD) connector is highlighted as a key component in liquid cooling systems, facilitating safe and rapid connections for cooling fluids, thus ensuring operational continuity in data centers [2][6]. - The UQD market is currently dominated by international players like Stäubli and Parker, but domestic suppliers are gaining traction due to cost advantages and shorter delivery times [3][38]. Group 2: Technological Advancements and Innovations - UQD technology is evolving towards lightweight, standardized, and blind-mate designs, with innovations in materials such as "plastic-metal" hybrid solutions that reduce weight and cost while maintaining performance [3][25]. - The article discusses the advantages of blind-mate UQD connectors, which allow for quick connections without precise alignment, enhancing operational efficiency in high-density data center environments [35][36]. - The liquid cooling technology is significantly more efficient than traditional air cooling, with liquid capable of transferring heat 25 times better than air, leading to substantial energy savings in data centers [13][14]. Group 3: Market Opportunities and Competitive Landscape - The rapid growth of AI and high-performance computing is driving the demand for liquid cooling solutions, with projections indicating that liquid cooling will transition from a supplementary technology to a mainstream cooling solution in the coming years [14][19]. - Domestic manufacturers are positioned to benefit from the global shortage of UQD products, as they can offer faster response times and lower costs compared to international competitors [40]. - The establishment of the Universal Quick Disconnect Alliance by Intel aims to standardize UQD products, enhancing compatibility and reliability across different brands, which is expected to facilitate broader adoption of liquid cooling technologies [33][39].

Investment Rating - The report initiates coverage with a "Strong Buy" investment rating for the company [1][9]. Core Insights - The company specializes in the export of civil valves and has established a global presence, benefiting from the expansion of global AIDC capital expenditures and the increasing penetration of liquid cooling systems [1][9]. - The company has shown steady revenue growth, with a projected revenue increase from 5.78 billion yuan in 2024 to 11.75 billion yuan by 2027, reflecting a compound annual growth rate (CAGR) of 31% [8][9]. - The company has a clear and stable shareholding structure, with the main shareholder holding 55.83% of the shares, ensuring consistent strategic decision-making [32][37]. Company Overview - The company has over 30 years of experience in the civil valve industry, focusing on fire valves, water valves, and natural gas valves, with a complete SKU range [6][13]. - The company has obtained certifications from multiple countries, exporting to over 70 countries and regions, and is the sole supplier of fire valves for Saudi Aramco in Asia [6][13]. - The company’s revenue from exports is expected to account for approximately 76% in 2024 [6]. Financial Performance - From 2020 to 2024, the company's revenue grew from 345 million yuan to 578 million yuan, with a CAGR of 14%, while net profit increased from 58 million yuan to 131 million yuan, with a CAGR of 22.6% [6][8]. - The company's gross margin improved from 34.53% to 40.34% and net margin from 16.82% to 22.65% during the same period, indicating enhanced profitability [6][30]. Market Characteristics - The global valve market was approximately 73 billion USD in 2021 and is projected to reach 90.5 billion USD by 2026, driven by increasing demand in healthcare, pharmaceuticals, and smart city developments [6][45]. - The valve market is characterized by a fragmented competitive landscape, with major players concentrated in the US, Japan, and Germany, while domestic companies often focus on niche segments [39][51]. Data Center Demand - The increasing penetration of liquid cooling systems in data centers is expected to drive significant growth in valve demand, as these systems require precise flow and temperature control [6][9]. - The complexity of liquid cooling systems is leading to a higher demand for high-precision control valves, which will increase the overall value of valve applications in this sector [6][9]. Competitive Landscape - The valve manufacturing industry is dominated by established players in the US, Japan, and Germany, while the domestic market remains fragmented with many small-scale companies [51][57]. - The company is positioned to capture market share due to its competitive pricing and shorter delivery times compared to foreign brands, alongside its extensive project experience in overseas markets [9][51].

Investment Rating - The report initiates coverage with a "Buy" rating for the company [3][9]. Core Views - The company is a leading player in the domestic aluminum profile extrusion mold industry, with significant growth potential in overseas markets. The company has expanded its product matrix from mold manufacturing to supporting equipment and precision components, benefiting from the growing application of aluminum profiles across various sectors [8][18]. - The company has demonstrated robust revenue growth, with a compound annual growth rate (CAGR) of 17.5% from 2018 to 2024, increasing revenue from 432 million yuan to 1.136 billion yuan. Net profit also grew at a CAGR of 28.4% during the same period [28]. - The aluminum profile extrusion mold market in China is projected to exceed 6 billion yuan in 2024, with the industry concentrating towards leading players. The company has increased its market share from 3.85% to 7.57% between 2018 and 2024 [41][44]. Financial Data and Profit Forecast - The company is expected to achieve total revenue of 1.136 billion yuan in 2024, with a projected decline of 8.5% in 2025, followed by a recovery with growth rates of 18.6% and 18.8% in 2026 and 2027, respectively [2]. - The forecasted net profit for 2025 is 120 million yuan, with an expected increase to 175 million yuan in 2026 and 242 million yuan in 2027 [2][9]. - The company's earnings per share (EPS) are projected to be 2.00 yuan in 2025, increasing to 2.91 yuan in 2026 and 4.03 yuan in 2027 [2]. Market and Industry Analysis - The report highlights the significant growth in the mold manufacturing industry in China, with the market size expanding from 159 billion yuan in 2011 to 343.4 billion yuan in 2023, reflecting a CAGR of 6.63% [44]. - The aluminum extrusion mold market is expected to benefit from the increasing production of aluminum profiles, which is projected to grow from 19.8 million tons in 2018 to 23.3 million tons in 2024 [8][53]. - The company has established a strong international presence, with overseas revenue reaching 190 million yuan in the first half of 2025, marking a year-on-year growth of 31.91% and accounting for 38.51% of total revenue [8][9]. Business Segments - The company's main revenue sources include aluminum profile extrusion molds and supporting equipment, which together account for approximately 80% of total revenue. The precision mechanical components segment contributes an additional 15% [32][33]. - The revenue from aluminum profile extrusion molds and components is expected to grow from 429 million yuan in 2025 to 617 million yuan in 2027, while the supporting equipment segment is projected to grow from 364 million yuan to 524 million yuan in the same period [10][32].

Group 1: Business Overview and Product Offerings - The company focuses on providing advanced system solutions and lifecycle services in the energy and power sectors, with key products including compressors and heat exchangers, covering a temperature range of -271℃ to 200℃ [3] - The product matrix includes various types of compressors such as screw, centrifugal, absorption chillers, piston, and industrial heat pumps, showcasing significant technological advantages and market performance [3] - The company has developed a full range of magnetic levitation compressor products, which demonstrated reliability and efficiency during the Beijing Winter Olympics project [3] Group 2: Market Applications and Industry Engagement - Products are widely used in sectors such as food processing, cold chain logistics, industrial refrigeration, and special environments like aerospace and mining [3] - The company has participated in drafting national standards for centrifugal refrigerant compressors and oil-free suspended centrifugal chillers [3] - The company’s products are applied in data centers, including liquid cooling systems, with successful projects in various high-profile data centers across China and overseas [3][4] Group 3: Competitive Landscape and International Expansion - The company’s overseas manufacturing base is fully operational, supporting tactical expansion into international markets [4] - Major competitors in the overseas market include leading HVAC manufacturers from Europe and North America [4] - The company plans to launch upgraded products in July 2024 to enhance competitiveness in the data center cooling market [3][4] Group 4: Nuclear Power Industry Engagement - The company is focusing on core scenarios in nuclear power, developing innovative technologies for nuclear island cooling and heat recovery [4] - It has provided services to several nuclear power stations in China, ensuring safe and efficient operation [4] - The company’s subsidiary has extensive experience in nuclear refrigeration, being a key contributor to national standards in the field [4]