Summary of Conference Call on Su Lian Co., Ltd. and UQD Market Company and Industry Overview - The conference call discusses Su Lian Co., Ltd. and the server liquid cooling UQD (Quick Connect Disconnector) market, which is projected to reach a market size of 20 billion RMB, with potential for even higher growth [2][4]. Core Insights and Arguments - The UQD market is expected to account for approximately 10% of the total server liquid cooling market value, translating to around 20 billion RMB by 2030 [4]. - Compared to the automotive thermal management market, the UQD market could potentially reach half the size of the global automotive thermal management piping and connector market [2][4]. - UQD technology has high barriers to entry, requiring strict no-leak technology, optimized flow rates, pressure drop management, and intuitive visual identification and automatic connection features [5]. - Domestic companies are rapidly developing in the server liquid cooling UQD sector, but the competitive landscape is still forming, with no long-established players like Parker Hannifin or Stäubli [6]. Su Lian Co., Ltd. Advantages - Su Lian Co., Ltd. has a strong foundation in the nylon piping market and extensive customer relationships, particularly in the new energy vehicle thermal management sector [2][7]. - The company has developed capabilities in injection mold design and product testing, which are crucial for entering the server liquid cooling UQD market [7]. - Su Lian Co., Ltd. has a comprehensive customer base in the new energy vehicle sector, including major players like Changan, BYD, and CATL, providing solutions across battery packs, chassis, motors, and air conditioning [8]. Upstream Industry Chain Development - The company has enhanced its precision mold processing and equipment design capabilities, which significantly benefit high-end new energy vehicles and complex server liquid cooling systems [9]. Recent Developments - Su Lian Co., Ltd. has established a subsidiary, Su Lian Intelligent Control, to expand into the intelligent computing market, aiming for multiple growth trajectories beyond the UQD market [3][10]. Market Outlook and Risks - The liquid cooling industry presents numerous opportunities, especially for companies transitioning from new energy vehicle thermal management systems [11]. - Risks include the potential underperformance of UQD development and significant increases in raw material prices [11].

Investment Rating - The investment rating for the company is "Buy" with a target price not specified [5] Core Views - The company has shown continuous improvement in profitability despite challenges in its equipment business, which has been a drag on growth [1][2] - The cooling component revenue reached 5.41 billion yuan in H1 2025, up 8.8% year-on-year, while the equipment business revenue fell to 480 million yuan, down 31.4% [2] - The company is positioned as a leader in the refrigeration component sector, with ongoing structural upgrades in its home appliance business and expansion into the high-growth new energy vehicle thermal management sector [3] Financial Performance Summary - In H1 2025, the company achieved operating revenue of 6.73 billion yuan, a year-on-year increase of 6.1%, and a net profit attributable to the parent company of 540 million yuan, up 12.9% [1] - The gross margin for H1 2025 was 17.3%, slightly down by 0.7 percentage points year-on-year, but improved to 18.3% in Q2 2025 [2] - The company expects net profits for 2025, 2026, and 2027 to be 1.12 billion yuan, 1.31 billion yuan, and 1.54 billion yuan respectively, with corresponding dynamic P/E ratios of 12.6x, 10.8x, and 9.2x [3] Market Position and Growth Prospects - The company is leveraging opportunities in the secondary supply chain and is gradually establishing a new growth curve [3] - The domestic central air conditioning market saw a decline of 15.9% in H1 2025, impacting the equipment business, which has a longer cycle and fluctuating revenue recognition [2] - The company has optimized its expense ratios, with sales, management, R&D, and financial expense ratios showing improvements in Q2 2025 [2]

Investment Rating - The investment rating for the company is "Buy" with a target price not specified [4][3]. Core Views - The company reported a revenue of 3.021 billion yuan in Q1 2025, representing a year-on-year increase of 15.05%, and a net profit attributable to shareholders of 218 million yuan, up 4.34% year-on-year [1]. - The automotive parts business is expected to maintain high double-digit growth, supported by a favorable production schedule in the air conditioning sector [2]. - The company is positioned as a leader in the refrigeration components sector, with ongoing structural upgrades in its home appliance business and improvements in profitability [3]. Summary by Sections Financial Performance - In Q1 2025, the gross margin was 16.1%, down 1.4 percentage points year-on-year, attributed to a decline in high-margin equipment business and raw material costs [2]. - The net profit margin for Q1 2025 decreased by 0.7 percentage points to 7.2% [2]. Business Segments - The automotive valve market is entering an expansion phase, driven by new strategies from companies like BYD, which is expected to create significant demand for valve components [2]. - The company’s dual business segments are performing well, with projected net profits of 1.19 billion, 1.38 billion, and 1.57 billion yuan for 2025, 2026, and 2027 respectively [3]. Market Outlook - The overall production schedule for air conditioning is expected to show double-digit growth, which will support the company's revenue in the second quarter [2]. - The company is leveraging opportunities in the high-growth new energy vehicle thermal management sector [3].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 38.22 CNY [5]. Core Views - The company is expected to see improvements in its automotive parts business margins and is focusing on advancements in its robotics business [1]. - The revenue, gross margin, and expense ratios have been adjusted, with new profit forecasts for 2025-2027 indicating net profits of 3.666 billion, 4.246 billion, and 4.748 billion CNY respectively [2]. Financial Summary - **Revenue Forecasts**: - 2023: 24,558 million CNY - 2024: 27,947 million CNY (up 13.8% YoY) - 2025: 34,640 million CNY (up 23.9% YoY) - 2026: 39,396 million CNY (up 13.7% YoY) - 2027: 43,972 million CNY (up 11.6% YoY) [4][10] - **Profitability Metrics**: - Gross Margin: 27.6% in 2023, expected to remain stable through 2027 - Net Profit Margin: 11.9% in 2023, projected to decline slightly to 10.6% by 2025 [4][10] - **Earnings Per Share (EPS)**: - 2023: 0.78 CNY - 2024: 0.83 CNY - 2025: 0.98 CNY - 2026: 1.14 CNY - 2027: 1.27 CNY [4][10] - **Valuation Ratios**: - Price-to-Earnings (PE) Ratio: Expected to decrease from 37.9 in 2023 to 23.3 in 2027 - Price-to-Book (PB) Ratio: Expected to decrease from 6.2 in 2023 to 4.1 in 2027 [4][10] Business Segments - **Automotive Parts Business**: - Revenue of 113.87 billion CNY in 2024, up 14.9% YoY, with a gross margin of 27.64% [10]. - **Refrigeration and Air Conditioning Business**: - Revenue of 165.61 billion CNY in 2024, up 13.1% YoY, with a gross margin of 27.35% [10]. - **Robotics Business**: - The company is nearing mass production of humanoid robots, which is expected to open new growth opportunities [10].