Summary of the Conference Call on Engineering Machinery Industry and Hengli Hydraulic Industry Overview - The engineering machinery industry is experiencing a return to normal sales levels after a high base effect from local policies in Hebei, leading to a significant year-on-year decline in excavator sales. However, excluding Hebei's impact, medium-sized excavator sales remain stable, while small excavators show volatility due to agricultural construction subsidies. The overall industry trend remains upward for the year [1][2][6]. Key Points on Hengli Hydraulic - Hengli Hydraulic reported a remarkable production increase in June 2025, with cylinder production growing over 50% year-on-year. The growth rate for small excavator cylinders is particularly strong, and medium to large excavators also maintain high growth rates. The company's market share has significantly improved, with a recovery in overseas customer orders and increased penetration in the domestic supply chain for export products [1][3][5][15]. - The company benefits from both industry beta and its own alpha drivers for revenue and profit growth. The potential shift of major manufacturers away from self-manufactured hydraulic components through joint ventures or sales is expected to positively impact Hengli's long-term growth prospects [6][8]. Sales and Market Performance - In May 2025, excavator sales data fell short of expectations, particularly in the medium-sized segment, which saw a decline due to last year's high base from Hebei policies. However, the overall sales trend for the year aligns with the industry's upward trajectory, with an expected domestic excavator sales growth of 15% [2][10]. - Major manufacturers in the crane and concrete equipment sectors experienced domestic growth exceeding 20% in May 2025, with overseas growth also performing well, indicating a positive outlook for Hengli's non-excavator cylinder production [7]. Future Projections - The engineering machinery industry is expected to maintain its upward trend, with domestic excavator sales projected to enter a growth phase as physical workload aligns with ownership levels. The export of second-hand excavators is expected to alleviate market pressure, and the lifecycle of excavators reaching ten years will further boost sales [11][12]. - The performance in overseas markets, particularly in Africa, Asia, and the Middle East, is stable, with global tariff policies favoring the engineering machinery sector in the long term [14]. Additional Insights - Short-term data fluctuations and adjustments in expectations have limited impact on manufacturers' profits, with more significant factors being rebate policies and market competition [4][9]. - Hengli Hydraulic's performance is bolstered by both domestic and international markets, with its robotics business progressing as planned, providing long-term growth potential. The favorable exchange rate with the Japanese yen may also lead to better-than-expected second-quarter results [15]. Conclusion - The engineering machinery industry is on a positive trajectory despite short-term challenges, with Hengli Hydraulic positioned well for growth due to its strong production performance and market dynamics. The anticipated shift in major manufacturers' strategies regarding hydraulic components could further enhance Hengli's market position and growth potential [6][8][16].