Summary of Tunan Co., Ltd. Conference Call Company Overview - Tunan Co., Ltd. started with welding materials and has transformed into a high-temperature alloy enterprise, benefiting from domestic strategic layouts since the 1990s. The core business includes casting high-temperature alloys, deformed high-temperature alloys, special stainless steel, and other alloy products, with casting and deformed high-temperature alloys accounting for approximately 80% of total revenue [2][4][5]. Core Business Insights - The company has established a deep collaboration model with main engine manufacturers through investments in its Shenyang subsidiary, aiming to expand into the aerospace engine components business and achieve upstream and downstream integration [2][6]. - From 2020 to 2023, the company experienced rapid growth, but revenue and profit are expected to decline in 2024 and the first half of 2025 due to inventory destocking cycles. A recovery in demand is anticipated in the second half of 2025, marking an operational turning point [2][8]. Financial Performance - The company’s overall profitability remains stable, although there was a slight decline in the first half of 2025 for casting high-temperature alloys and special stainless steel due to product price adjustments and structural changes. The industry faces pressure for cost reduction, but gross margins are expected to stabilize post-demand recovery [2][11]. Order Situation - As of mid-2025, the company holds a total order amount of 1.75 billion yuan, significantly up from 520 million yuan in the same period last year and 300 million yuan at the end of the previous year, enhancing confidence in future performance [10]. Business Segment Performance - The deformed high-temperature alloy business shows steady growth due to its broad application scenarios. In contrast, the casting high-temperature alloy business peaked in 2023 but saw a significant decline in 2024, with no immediate improvement expected in the first half of 2025. The aerospace engine components business is expected to start contributing revenue in the first half of 2025 [9][10]. Strategic Investments - In 2021 and 2022, the company invested in two subsidiaries in Shenyang, forming a close collaboration model with main engine manufacturers. This strategic choice has proven effective, providing strong growth potential [6]. Shareholding Structure and Incentives - The current chairman and his father are the actual controllers of the company, with a relatively stable shareholding structure. The implementation of equity incentive mechanisms in 2022 and 2023 has effectively improved performance and operational quality [7]. Industry Position and Competitive Advantages - Tunan Co., Ltd. holds a significant market share in the high-temperature alloy industry, focusing on casting and deformed high-temperature alloys, which account for about 90% of the market. The company has achieved breakthroughs in integrated casting technology, enhancing product quality and reducing costs [12][14][15]. Future Growth Prospects - The aerospace fastener business is expected to have high profitability, with demand not only for new aircraft manufacturing but also for maintenance and aftermarket services. This sector's growth potential is anticipated to provide continuous momentum for Tunan Co., Ltd. [19][20]. Long-term Strategy - The company plans to continue focusing on high-value-added products while actively expanding into horizontal market applications. By maintaining a priority on military products and enhancing competitiveness through technological innovation and capacity expansion, Tunan Co., Ltd. aims to solidify its market position for long-term stable development [21].

Core Viewpoint - The company is experiencing significant revenue and profit declines in the first half of 2025, but there is a notable increase in contract orders and a strategic shift towards the aviation small and medium-sized parts industry [1][3][4] Financial Performance - In the first half of 2025, the company achieved revenue of 599 million yuan, a year-on-year decrease of 18.16%, and a net profit attributable to shareholders of 93 million yuan, down 51.41% year-on-year [1] - For Q2 2025, the company reported revenue of 313 million yuan, a year-on-year decrease of 18.01%, but a quarter-on-quarter increase of 9.49%. The net profit attributable to shareholders was 51 million yuan, down 48.98% year-on-year but up 23% quarter-on-quarter [2] Product Performance - Revenue from deformed high-temperature alloys in the first half of 2025 was 277 million yuan, a slight decrease of 0.24% year-on-year, while revenue from cast high-temperature alloys fell significantly by 39.62% to 169 million yuan [1] - The company has also seen a decline in revenue from other alloy products and special stainless steel, with the latter down 19.38% to 31 million yuan [1] Order Backlog and Strategic Initiatives - As of June 2025, the company had signed contracts with an expected revenue of 1.75 billion yuan, representing a year-on-year increase of 237% and a 478% increase compared to the end of 2024 [3] - The company is establishing a wholly-owned subsidiary to develop automated production lines for aviation small and medium-sized parts, with a total investment of 413 million yuan as of June 2025 [3] Market Outlook and Projections - The company is one of the few in China capable of mass-producing both deformed and cast high-temperature alloys, with significant growth potential in the high-temperature alloy market driven by increasing demand in aerospace and domestic production trends [4] - Revenue projections for 2025-2027 are 1.423 billion, 1.767 billion, and 2.158 billion yuan, with net profits of 291 million, 371 million, and 461 million yuan respectively, indicating a positive growth trajectory [4]