Summary of the Conference Call for Farah Electronics Company Overview - **Company**: Farah Electronics - **Date**: August 16, 2025 Key Points Industry and Business Segments - In the first half of 2025, the automotive business accounted for 56% of revenue, while the energy storage business represented 22% [2][5] - The automotive sector's revenue share decreased quarter-on-quarter, while the photovoltaic sector's share increased [2] - Wind power revenue grew by 67% year-on-year, and industrial control revenue increased by approximately 16-17% [2][5] - The automotive sector's growth rate exceeded 30% [2][5] Financial Performance - Revenue in Q2 2025 increased by 18% year-on-year, with a corresponding rise in net profit [4] - Gross margin improved by approximately 3 percentage points quarter-on-quarter, attributed to a higher proportion of high-margin businesses and cost improvements [4][6] - The overall automotive price stability was noted, with a normal decline of 3-5% [13] Market Dynamics - The company holds a global market share of approximately 30-40% in the automotive sector [10] - The second quarter saw a recovery in automotive industry gross margins, improving by about 3-4 percentage points [15] - The demand for raw materials is expected to decrease in the second half of the year, with significant price reductions anticipated [17] Future Outlook - The automotive business is expected to grow faster in the second half of 2025, with a notable increase in delivery volumes in July [9] - The gross margin is projected to remain stable and improve in the third and fourth quarters of 2025 due to ongoing cost improvements [3][33] - The company is actively pursuing overseas investments to adapt to international trade conditions [3][36] Project Developments - The company received its first batch application project order for domestic dry capacitors in flexible direct current (HVDC) engineering, valued at several million yuan, with an overall localization rate of 30% [2][26] - The annual demand for capacitors in flexible direct current engineering is estimated to be around 800-1,000 million yuan [28] Challenges and Risks - There is uncertainty regarding photovoltaic order demand in the second half of the year, despite stable demand observed in July [8] - The company faces potential impacts from European carbon emission policies on automotive business orders starting next year [37] - Geopolitical risks may arise from the establishment of overseas factories, but the company believes it has competitive advantages in technology and cost control [38] Management and Operational Insights - Management expenses are expected to increase due to the launch of new projects, but the overall increase in management expense ratio is anticipated to be modest [34] - The company plans to expand production capacity based on order demand, with a utilization rate of approximately 90% in the first half of 2025 [35] Conclusion - Farah Electronics is positioned to leverage growth in the automotive and energy storage sectors while navigating challenges in the photovoltaic market and potential geopolitical risks. The focus on cost management and overseas expansion is expected to support future profitability and market share growth.